lemerck21

[lemerck21]

Finale

Well, I have definitely learned a lot of things I really didn’t know prior to taking this course. I have always been extremely confused when talking economics with people. I think the most helpful thing we went into was in regards to inflation. I have been really interested in the housing market lately (both rent/purchase , and it has really helped to understand the inflation that we are seeing now. I think the last chapter was really interesting as well, when it comes to the short-term trade-off because it something where I feel like we are seeing both high inflation and high unemployment, instead of low unemployment with the high inflation. I think it has also been interesting understanding the government spending when it came to the pandemic. This course has definitely put these things in a perspective that I can understand on an economics side of things and why our government and economy is where it is right at this very moment. 

If I am understanding this correctly, I feel like monetary policy should not be made a rule. I believe there needs to be flexibility in this. On one hand, there is good to having the rule when it comes to the short-run and keeping time consistency for policymakers. However, does this account for the unexpected? With flexibility over the rule, there can be less pushback on expectation. 

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Short Run Trade-Off

Basically, policymakers could expand aggregate demand to lower unemployment. However, there is a trade-off for higher inflation. This works the other way around, as well. When there is faster economic growth in the short run, we see higher inflation and lower unemployment. 

Honestly, I don’t think we’re seeing much of a trade-off with this right now. We are seeing crazy high inflation as well as high unemployment. I am hoping we will see the unemployment rate go down soon, but it has definitely been interesting seeing the demand for employees all over the US. With our inflation so outrageous right now, I’m sure we will start seeing the trade-off. However, the short-term aspect to it doesn’t seem so short to me. For instance, this inflation and employee shortage has been going on for a few years. So, what really is the short-term time? I feel like we look into this on graphs, short-term can be a decade. 

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Trade Deficit

I chose this article from CNBC, “U.S. posts record trade deficit in 2021″. According to this article, the trade deficit last year rose to an all time high of $859.1 billion which is 27% higher than 2020. The chief economists at FWDBONDS of NY said that we won’t see a normal trade picture until the pandemic purchases slow down and we go back to life as it was before. I don’t think we will ever really get back to life pre-pandemic. The silver lining being the remote school/work life we have created.

In 2021, there were a record high of food imports from 70 countries, with Canada, Mexico and  Germany at the top. While imports were at a record high, so were exports, especially with petroleum. The trade gap was at 3.7% of the GDP, which was up from the 3.2% in 2020. 

Trade deficits offset capital flows. If a country has a rising level of imports and a growing trade deficit, it can lead to a negative affect on the country’s exchange rate. 

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Trade Deficits

https://www.bollyinside.com/news/world-news/amid-russia-ukraine-conflict-us-trade-deficit-reaches-new-highs 

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Market for Loanable Funds

The market for loanable funds basically descries how firms borrow money: savers deposit and borrowers take out loans. The interaction between supply of savings and the demand of loans determine the real interest rate and how much is loaned out (Khan Academy). The supply of loanable funds comes from both private and public savings. Overall, investment is the source of the demand for loanable funds and savings is the source of the supply them. 

If interest rates increase, then it will basically discourage investments from occurring because there will be a higher opportunity cost. I believe interest rates are low right now. ROI is low during recessions and high during booms because people are scared to lose money in the recession (or do lose money) and high in the booms because they have money. The stock market plays a key role in this as well. 

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Inflation

The costs of inflation include menu costs, shoeleather costs, loss of purchasing power, misallocation of resources, tax distortions, confusion, and redistribution of wealth. Deflation  means there are deep rooted economic problems. It would lower the nominal interest rate leading to a reduction to the cost of holding money. A fall in aggregate demand could lead to falling incomes and rising unemployment. 

For me, I have been considering buying a house. It is definitely in dream world, but it’s nice to have it on the radar. However, making this economic decision has heavy weighing of cost/benefit analysis especially in this housing market. So many people are escaping to our mountain towns to get away from the dense cities. Considering the inflation and the sellers market I am seeing in the valley; I have considered waiting on this decision to see where the economy goes in the next year or so. 

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Money

Cash is rather crucial to the money supply. Cash that is deposited into bank accounts increase the total reserves of the bank. The bank ends up keeping some of the money on hand as a required reserve and loans the excess reserves out. Thus, when the loan is made, the money supply increases. Ultimately resulting in the bank’s “creating” money and increasing money supply (Khan Academy). 

The Federal Reserve Banks are broken out into 12 districts. They are the operating arms of the Federal Reserve System and are supervised by the Board of Governors (Federal Reserve). The FRB injected money into the economy by purchasing securities on the open market, then they added the corresponding funds to the bank reserves of commercial banks (Investopedia). Ultimately, the banks increase the money supply through giving out loans. 

I am most definitely worried about our current and future inflation. Living in a mountain town, cost of living has never been low. However, it is now at an all time high. Gas prices or almost $5/gallon, the housing market is insane and services and supply for businesses are through the roof. I think the FRB overshot. Two years ago, they removed Regulation D that bankers were limited to 6 withdrawals or transfers per month. Though the FRB has tools in place to make sure the money supply keeps up appropriately with the economy, from my understanding, it did supply too much during the pandemic. 

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Unemployment

I believe there will always be at least some unemployment. However, I don’t think it will always be like what we have seen in the last few years. Unemployment Insurance is definitely a policy that affects the unemployment rate. I think this can be positive and negative. It is good when it come to those have lost their job unexpectedly and truly rely on paycheck to paycheck. There really is importance and good to it. On the other hand, it can sometimes counter with people not really having that incentive to job hunt (EconPort). 

I think the response to the pandemic was one that seemed right at the time because it was just such uncovered ground for everyone. It brought insane setbacks and devastation to so many. Looking at where the government is now and how there is such a shortage of labor, it might not have been the best solution in the long run. However, I feel that it was a solution that I am grateful for and believe it truly helped millions of people. However, the economy is definitely seeing major setbacks due to this decision. Businesses have shut down or can’t even open daily due to the labor shortage we are seeing.

Investopedia

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Consumption & Productivity

Subsidies are often used but are not always used for the right thing. For instance, it still blows my mind that the government subsidizes non-organic agricultural practices such as the corn and wheat producers. We should be incentivizing good practices and quality food for everyone’s well-being. We should not be seeing crap food for cheap because they are subsidized, we should be seeing a system that helps get better quality food more readily available to individuals. People, especially now a days, want to live clean and put good things into their bodies. It makes me wonder why the government continues to subsidize mass productions of processed food and not quality, healthy food.

Policymakers can go two different routes when it comes to changing consumption and production habits of society: traditional regulatory approaches or incentivizing (EPA). I have found that when it comes to help businesses with the hit it takes to purchase compostable materials, having a subsidy or rebate program to help with their hit on costs are extremely beneficial. I also see the benefits with subsidizing education and healthcare. So many low-income individuals can have proper healthcare because of Medicaid.

As a single mother, I believe (and believed before I was a mother) that childcare should be more accessible to families. The fact is, parents spend thousands of dollars to have their children attend daycare and preschool each year, and that is if they can even get into one (it takes almost a year sometimes more to move through the waiting list in Eagle County). Ultimately, I think that early pre-k childcare for parents should be subsidized appropriately. These are such crucial developmental years for children. It takes a toll on low-income households trying to work and make sure their children get the appropriate socialization and learning at a young age.

From an environmental standpoint, the negatives with population growth are the increase of waste ultimately effecting the environment, more pollutants and environmental degradation. Though many businesses are seeing a problem with even staying open due to the lack of employees; another potential issue with population growth could be the increase of unemployment. Some positives with it include technological advances, innovation, increased production of goods and increased consumption.

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CPI

Living in Eagle, CO for almost a decade, I have seen the inflation rate increase immensely. The cost of gas, rent, and food prices have shot up extremely. I used to work at a local BBQ restaurant here in town. They still are the least expensive for not having to go to fast food, but they have had to increase prices to make a profit and not lose money. As we know, gasoline prices have increased drastically. I just watched a Shell station change their signage from $3.79 to $3.99 right outside my work yesterday. In the past few years, housing prices have skyrocketed. Currently, I live in a townhome. I was speaking with my neighbor who bought his place about 7 or so years ago for a little over $150,000. Last week I saw there was a unit for sale in our neighborhood for $599,000. WHAT?! I believe that urban areas are seeing inflation rates, but they are nowhere near what we see here in our small mountain communities.

It seems to me that the CPI accuracy is important for all these uses. If I am understanding it correctly, it is important to make adjustments to important things like Social Security and food stamps because the elderly deserve the proper amount of money and low-income deserve to have access to food. I could be mixing this up, but it seems to me that taking in annual inflation to adjust appropriately helps so no one gets slighted when it comes to these uses. I haven’t paid attention to the CPI, but I definitely plan to moving forward.

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GDP and All We See

What are the components of GDP? This question pertains to the 5-3 section headline The Components of GDP. The answer is Y (GDP) = C (consumption) + I (investment) + G (government purchases) + NX (net exports). Purchasing groceries each week at City Market is a component of GDP. As governments start incorporating sustainability into their town or city missions and plans, new positions are created that attribute to government purchases.

The GDP grew 6.9% in the fourth quarter of 2021. This is believed to have happened due to holiday shopping and businesses being able to keep their shelves stocked. Overall, for 2021, GDP went up 5.7%, from stimulus spending, which was the largest annual increase since 1984 (Bartash). Much of the supply chain has seen issues since the pandemic began. According to the Conference Board, they forecast that Q1 of 2022 will slow down by 2.0%. This could have to do with the COVID Omicron variant spikes before the end of 2021 and into the beginning of 2022. Health expenditure is related to GDP and saw a skyrocket in that in 2020 with the COVID pandemic. The demand for equipment, supplies, hospital space, everything went up while the supply went down. This has a huge effect on our pandemic now and the next one.

https://www.marketwatch.com/story/coming-up-u-s-fourth-quarter-gdp-11643289488?mod=home-page&mod=article_inline https://www.thebalance.com/us-economic-outlook-3305669 https://www.conference-board.org/research/us-forecast

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Shifting Curves

With the new, thriving rideshare market, taxis have taken a hit in larger cities everywhere. I believe that if we showed two separate graphs with two markets, taxis and ride-sharing companies, we would see the supply curve shift differently in each market. First, in the taxi company market, the supply would increase moving the supply to the right, and the demand would decrease. Ultimately, the equilibrium price would go down. Oppositely, the ride-share company market would see a decrease in the supply, moving the supply curve to the left and an increase in demand. This would show that the equilibrium price goes up.  

When the minimum wage is increased then the demand for labor will go down, and the quantity of supplied labor goes up. Businesses cannot employee as many people due to the high costs incurred. This means that there would be movement upward along the demand curve and above equilibrium.

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Trade Advantages - - Ch. 3

I liked that this chapter had a way to describe comparative and absolute advantage in such a relatable way with Ruby and Frank and the reference with LeBron James and his neighbor Kaitlyn. I found it valuable to know that each good should be produced by the country that has a lower opportunity cost of producing that good when it comes to international trade (54).  

I feel that international trade has pros and cons. I do think that if done without appropriately then it can be good for both US economy and the economy doing trade with. It is also important that developing countries have access to goods and services. However, I do feel like there are cons with international trade. The documentary Life & Debt does shed light on the shadiness the US plays when it comes to trade. I think trade both overseas and within the US is meant to support employment which supports economy. I think that they differ in ways of larger scale. Trade in the US is more like the example in the book of Ruby the rancher and Frank the farmer – a more local form of trade. While trading with China supports both economies and allows the US to prosper in other markets.

I recently got two new puppies. Yes, two! But we bought them cute collars at Petco because they really needed different ones then what had been provided them and we were in Las Vegas at the time. I know that the collars we bought we bought at the Petco were not produced in the US. While I’m sure there were local options in Vegas, it would have sent us on a hunt in the minimal time we were there. However, on our first trip to our vet here in Eagle we saw that they sold collars made by a woman right down the road in our town. That is truly local. Someone creating a good in your town. However, I would have to ask her while she creates the collars here in Eagle, are all of her products to create those collars produced locally or in the US? While maybe the fabric, buckle or metal might be sourced overseas, I think it is still great to support someone who assembled it and used their artistic eye in their craft right down the road from me.

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“Thinking Like Economists” Ch. 2 Reflection

I wouldn’t necessarily say Al Gore is my favorite policy maker, but I do like his outlook in our fight against climate change. In a speech Gore gave back in 2008 backing former President Barak Obama, Gore stated, “We are facing a planetary emergency which, if not solved, would exceed anything we've ever experienced in the history of humankind” (NPR). This would be considered a positive statement because it is how the world is and could also be tested by analyzing the data in regard to climate change. A normative statement in this speech from Gore states, “The solutions to all three require us to end our dependence on carbon-based fuels”. Here, he is saying what the solution should be to the climate crisis, strengthening national security and reviving the US economy. Though I agree with his statement, some might argue against his solution.

I definitely have things on the table of propositions in which I agree with and some I do not agree with. I also found a few that I may need clarification because I’m not sure if I agree or disagree with it. I feel like I agree to a certain extent on the first proposition, but I also struggle because I live in one of the most expensive places in the US and the most run-down rentals can go for such an aggresses amount. So, I do find that as a struggling single mother it’s extremely hard to find an affordable rental that I don’t have to have roommates for. I agree that the US should eliminate agricultural subsidies. Agricultural subsidies seem to only help the large farming corporations who put out unhealthy food on the market and do not help small farmers. I think it would be wise for the U.S. to eliminate agricultural subsidies or potentially restructure the system. I don’t know if I fully understand number 17 on the proposition list, “A minimum wage increases unemployment among young and unskilled workers”. Is this saying that 79% of economists don’t believe there should be a minimum wage? I think minimum wages have gotten tricky in the U.S. because of cost of living and even jobs that are on management level or well above entry level are only offering $30,000-$40,000 a year. That is low-income pay especially after taxes regardless if you are living in Colorado or Alabama.  

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Week 1 Reflection

1. What in this chapter made you think about an economic concept differently than your previous beliefs?   2. What new questions do you have now about the US economy based on this chapter?

A few semesters ago, I took Environmental Economics which was my first introduction to economic concepts really on a secondary education level. So, I have familiarity with economic terms, but I have been interested to learn more how economists think in a way that differs than environmental economics. One principal discussed in chapter one that kind of makes me think of an economic concept differently is Principal 8: A country’s standard of living depends on its ability to produce goods and services. Regarding this principal is the focus of how productivity correlates with standard of living. I only say this because in the text it discusses how nations that produce large amounts of goods and/or services has higher standard of living while nations with lower production rates has lower standards of living. I understand this, but when I see the average Chinese income to be $17000, I am a little confused. And maybe it is because much of the market is ran by US companies though a lot of production is in China. I think this popped out the most to me.

  Again, seeing as I have taken Environmental Economics, I want to know your opinion as someone so merited in economics, what do you think the potential of trade-off limits for economic and environmental decisions. Do you think we can get to a place in our economy where there doesn’t have to be a trade-off and they are thought of as the same? I guess I would ask the same question pertaining to efficiency and equality; can we get to a point where efficiency and equality go hand-and-hand? I personally believe equality should always be a centralized focus for the well-being of all, and I believe there is a way to manage scarce resources in a way that equality is always thought of and not just a trade-off.

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A Reflection on the Reflections

I believe incentives play quite a large role in environmental resource management. Take recycling for instance; there are many states and/or cities that incentivize recycling say aluminum cans. People don’t just want to recycle for the environmental reasons, they need something out of. No, not all people need an incentive, but majority do. “There’s no such thing as a free lunch”. Another good example of a personal incentive with an environmental effort would be with solar energy for your homes or driving an electronic car. There are incentives when purchasing an electronic car or using solar energy with tax right offs. Basically, the government incentivizes by allowing money back on your tax return. Human beings, by nature, want an incentive to do something because (and especially with the environment) they’re thinking about the here and now and how they benefit, not how it might help in the future to do something. With environmental resource management, market-based incentives seem to work better than command-and-control. I don’t think command-and-control is a bad policy type, but definitely think it leaves more room for error especially with environmental resource management; such as pollution. I think policymakers should take incentives into account. No, not everything should be incentivized. I do think incentives can sometimes backfire on the policymaker; for example, the VW company’s emission test cheating. As we keep progressing, I see where incentives and command-and-control should be adjusted.  

I just want to keep this link, it’s a good one! https://www.epa.gov/environmental-economics/economic-incentives  

I found the Biodiversity and Valuation very interesting. I really enjoy environmental science and endangered species. So, incorporating this topic together with economics was quite intriguing to me. Especially considering where I used to work and just how the trade system might have gone down where it comes to boots and belts with animal skins. It rides on the line of the economics versus ethics which I really enjoy to dissect with many things in this world. I really enjoyed learning more about the renewable energies and how they work with the economy. I find the renewable energies so important and crucial not only to the environment but the economy, as well. They offer even more jobs in this world which are crucial. I believe renewable energy is something that only brings good for the future. So, it’s definitely something I want to continue to focus on with how they do in our economy. 

I would want to spend more time on environmental policy. I truly enjoy environmental policy. It is one of the reasons I came back to school after being out of it for 8 years. So, spending more time on that with the effects on economy would be great. I also really enjoy ethics, so I was excited to have a reflection on Morals and Motivation. I think the line with ethics and economics is an interesting rope that I really like to dive into. I love sustainability and am think it’s a great way moving forward for the environment. However, this semester my perspective has not changed, but grown seeing the economic side of everything; especially when it comes to efficiency. I guess I thought the two went together in the sense of complementing each other. However, now I see that being sustainable doesn’t always mean being efficient. Especially if production costs and transportation costs end up being less efficient in pursuit to the sustainable goal.

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To Settle or Not to Settle..

The four conditions for settlement are brute force, a decision rule, agreement, or a take-it-or-leave-it offer. In an agreement, it can be difficult to settle if the two parties don’t agree on a single thing. An amount is projected on how much is saved by not going to trial. With an agreement, the dividing of the bargain rate might be disagreed upon. One party wants to make sure they at least settle for their expected jury award minus their expected future court. While the other wants to make sure the settlement is lower than their predicted payout plus their attorney fees. If the plaintiff and defendant cannot come to an agreement, there will be no settlement and it will go to trial. With the uncertainty of jury awards, there are a few remedies for this: having judge make decision over jury, have a standardization of awards for particular offenses, or caps on damages. If one of the parties has unrealistic expectations a good deterrent is the judicial settlement conference. This brings a judge in with both parties and their representation if one’s expectations of settlement amount needs to be “brought down to earth”. 

Unfortunately, the link would not open for me on any device so I looked into the spill through other sites and newspapers, like the Colorado Sun, EPA’s website and the Denver Post. The EPA should be responsible for the Gold King Mine spill into the Animas River and the cleanup. The affected parties. New Mexico, Utah, Colorado, and the Navajo Nation, all sought after litigation. Ironically, the Environmental Protection Agency is the one who didn’t protect the environment, go figure. I know it was a third-party contractor who cause the spill, but it is still the EPA’s responsibility because they hired them and this is their program they sought out. Also, knowing businesses that seek contractors, signing contracts that cover this situation is always in place (unless they don’t know what they are doing) in order to cover themselves in incidents like so.  I read in Bloomberg Law that the contractors are immune under the Superfund law and should be free of liability under the “response action contractor” provision. It is also unfortunate seeing as they were extracting for the whole purpose of a potential cleanup and ended up pushing too far through layers of rock where the orange water flowed out. I did read that in 2016 New Mexico was taking legal action against the state of Colorado itself. I find this rather daunting because it wasn’t the state’s fault and they were just as irate as the other states and taking legal action themselves against the EPA. New Mexico said they would be open to a settlement with Colorado and EPA. In this case, they would need to come to an agreement on the settlement amount. I don’t think the age of the problem necessarily matters. According to the text, the Exxon Valdez spill that occurred in 1989 wasn’t resolved until 2015 (Anderson). Litigation can go on for decades. When it comes to disputes, options for settlement would be either agreement or take-it-or-leave-it offers. With agreement, as said above, the EPA and the parties involved seeking litigation, would have to really factor all the potential costs and benefits with coming to the agreement. That right there would extend more time for the settlement. I think there are potential risks especially in Colorado due to the high number of mines in this state. This spill was just one of many potential spills if not extracted properly in the future. The costs are far greater than were known prior to the spill. 

The air pollution in Colorado is continues to be a major issue. According to the NPCA, an estimated 32,000 children have asthma attacks due to the air pollution caused by smog from the oil and gas industries. Also, according to the American Lung Association, Denver is ranked 12th on the list of cities in the US most polluted by ozone. Even this summer we still didn’t reach EPA and federal standards. According to the Colorado Sun, neighboring states contribute the highest to our ozone pollution from drilling in oil and gas industries (like Texas and Oklahoma, also Mexico). Legal action for executive order from Governor Polis has gone through legislation. I haven’t found a dispute such as the spill in 2015, but this is the most concerning pollution issue Colorado faces as of today. Taking action with oil, gas and petroleum companies in their effort to capture emissions leaks and sealing methane leaks is huge. Also, people in Colorado either drive a Subaru, Tesla or large diesel trucks. Pushing for policies that lower transportation emissions is huge. We’ve definitely made great stride with electronic cars and having charging stations pretty much everywhere. However, the diesel trucks and insane amount of 18-wheelers I see on a day-to-day basis is insane. I think a carbon tax initiative is the way to go here in Colorado since we can’t meet EPA standards to this day. Especially summertime showing higher heat indexes, the health of citizens is a wide concern. So, action must be taken.