Friday, December 07, 2007

Would You Care for an Appetizer?


Thank Emilie for this little snack of economics news! As we near the end of microeconomics and begin to look forward to macroeconomics next sememter I think this article Emilie brought in is the perfect warm up for so much of what we will cover next semester. And though no one wants to see the economy take a nose dive, I am sure we will see that we have a lot to talk about and watch next semester as we begin to explore of the important macroeconomics issues.


When you read this article think about what you see as the single most important piece of information. Why do you see this as being so significant?


Thanks for a great semester and never fear...I may just blog over the break! I really do think you should make my blog your homepage :) Hopefully I will come back from vacation with some rich insights on Asian economies! Have a wonderful vacation and see you in February.

20 comments:

Nicolas said...

Yes I am blogging... how wierd huh?:P:P
Well the article is quite scary once again. One starts to think if studying in teh USA is teh right thing to do as once one finishes college, you'll be in a counrty with a horrible economic recession, but i guess its a risk one has to take. Regarding the personification that when The US sneezes teh world gets a cold, it is true. It would be interesting to see what foreign countries in the US will do if teh situation gets out of handle. But it is interesting how much US citizens still consume. Like the blog bedore stated, black friday and the xmas shopping season are great example of this, maybe tehy'll have to learn to control their where there money goes.

carl said...

haha... i think i will at least put the site in my bookmarks bar...

The worst part of the US economy is the fact that many people continue to buy things regardless of their being in debt. The truth is that this often happens more with middle-upper class families than anyone else. This is because the higher you are socially, the more money you likely have tied up in things such as stocks and real estate. Take Bill Gates for example; while he is valued at bilions of dollars, in the short run he has access to very little of this money, because the majority is not liquid. however, when non-liquid assets are combined with american ego, you get what you have now. Rich people who enter debt will not admit they are in debt, and will continue spending as such, causing them to go further and further into debt. This of course has extreme negative effects on the economy, because when the time comes for people to pay off their debt, they arent able to do so, leading to foreclosure on many of their goods.

Ms. Stephens said...

Hi Nico and Carl! I see giving out grades today inspired in the blogger in you...hmmm!

I want to disagree with Carl a little bit on an aspect of his post (no offense Carl). I don't really think the problem is from the upper income people. I think the problem is with people who cannot afford things being convinced that they cannot live without them through advertising and basically living the lifestyle philosophy of "keeping up the the joneses". We as a society have been conditioned to believe that there is never enough. How many people do you know who would list shopping as a hobby, which just translates into spending money as a hobby. I think are materialism the our inablity to be satified with what we have is the root of the consumption problem in the US and the world.

Debora said...

This is an interesting article..
and the whole time I had this thought in my head that kind of deviates from the economic point, but theres so many articles around and all these economists saying that the US is headed for a serious recession..won't all this talking and warning actually make "consumers grow tight, and businesses cut investments" even more than otherwise would be? I mean all this scary talk (as nico called it) could actually make the recession worse than it otherwise would be...or not? :P haha

well now to the article.
i like how it points out the relationship of the US economy and the world economy..i guess the only thing we can do is wait and see what happens. maybe the US economy will suffer a recession and other economies will move at their right pace and itll be an opportunity to settle out trade imbalances...but US recession could also mean a world recession as the article states that when "the US sneezes the rest of the world gets the cold". And since the US is predicted to get pneumonia..!! the world economy is unpredictable!

Hugo said...

Saludos desde Tupungato, I am sorry I haven't been blogging it is just because I live in the middle of nowhere with no telephone...Felices Fiestas to all

In the present day the US has debts of trillions of dollars and is suffering a serious recession. It is caused by the citizen's inability to buy goods with money that would then end back to the government, making the "circular economic flow" chart work. In consideration with the rest of the world, the article explins through an optimistic view point that a low dollar would be an advantage for developing countries. For example, with a dollar closer to the peso, argentina would be capable to buy goods from the United States. This would make possible for these countries to catch up with those strong economies. And as a concequence the United States would be selling a large quantity of goods avoiding a stronger recession and opening the possibilities for a recovery. However it is said that if the US's economy falls, other's will follow. For that reason some economies will have to learn to start becoming indpendant and stop relying on the US.
Chau
note: I recomend the "Lions for Lambs" movie.

Prem M. Chattani said...

Change in blog, did not notice it, my apologies for the tardiness. Looked at the other blog 3 times a week and felt that Ms. Stephens' posting streak was over for a moment haha.

The most important piece of information to me was again the stretch relationship between other nations economies' and the US' economy. Yet, since I believe the US will follow the Keynes' thoughts (mainly lower the standing of the US dollar in relation to a stronger currency to increase net exports, massive production and creation of works to increase consumption, and generate a state of security for investments) to attack unemployment at the expense of inflation, the world's economies will suffer, yet they will take different roles globally. They will suffer because in many aspects the economies will be hit, yet mainly in their exports. The US will not import as much if we go with Keynesian thoughts. As a matter of fact, it will export like crazy to keep up the net exports. Then, there has to be a massive consuming source elsewhere. Maybe, China will take over in that section for the while. The counterclaims (that China depends highly on US consumption of Chinese goods, and that Chinese mentality towards consumption is different that the US) will not win arguments today. China today has changed its mentality on consumption (FORGET NOT OUR PRESENTATIONS IN CLASS AND THE VIDEO). China has a relationship with US consumption of its goods and it will suffer. Yet, China exports today nearly to every corner of the world in a massive scale. It looses a market, but it has other to cushion on. Chinese products and Chinese labor are world famous. Yet, does US consumption of Chinese goods lower that much keeping in mind we are talking about US CONSUMERS??. The second most important thing in the article, US citizens and how they consume. I will hold my judgment on this like the good old Hellenistic skeptics. Yet, looking at the bigger picture, humans. That is at the heart of Econ, and that is why it is not textbook perfect, but a bunch of theories made to be broken.

Happy 2008 to everybody!

Tyler said...

“When the United States sneezes the rest of the world gets the cold." -- This is a great metaphor from the article, which describes how the US economy is such a pivotal force in the global economy. The viewpoint I took away from the article was not that the US would enter a recession, which was the gravest prediction, but that the dollar would continue to fall in value. The best outcome from the weakening currency scenario is that foreigners buy more American goods, so increased US exports check out the decreased imports. But remember, this only happens when the American consumer considers their debt too high to keep buying goods. Who knows when that will be, especially considering that 70% of the US economy is based on consumer spending! I think the economy will be able to survive 2008, until the next President decides on how to save it.

Prem M. Chattani said...

http://www.lanacion.com.ar/economia/nota.asp?nota_id=979032&pid=3817741&toi=5825

Interesting article by La Nacion. Greenspan and the Recession.

Mack f. said...

The problem in the united states is that they keep spending money they don't have. This seemed to be good at the beginning as a grow for the economy, but it can't go on forever. The world wants the United states to be strong, but their own consuming habits will have a huge influence on the world. The rest of the world will go down in an economic crisis with the united states. It seems that the US is heading for a crisis. When rumours of a crisis start going around, the confidence of consumers gets even lower and the spending decreases even more which damages the circular flow of the economy and eventually causes the crisis.

Prem M. Chattani said...

Yeah, I am aware I am posting for a third time and maybe it is a little excessive. Yet, I have been following what happens with the US economy in Argentine papers. Weird, but interesting.

http://www.lanacion.com.ar/economia/nota.asp?nota_id=979314&pid=3822901&toi=5823

Another article from La Nacion(sorry for being repetitive and for having it in Spanish)that talks about how currently the rumors of a recession and the weak dollar are affecting the stock markets worldwide. So, what happens in Wall Street, affects the world.

amy said...

I thought that the most interesting information in this article was how some economists predicted this recession in the US economy might be beneficial for other international economies, such as India and China. I would usually think that a recession in suc an economically important country would cause major issues in everyne's economy, but this article gave an alternative. Possibly, the US's recession will allow other countries economies to develop, and "correct the imblanace".

emilie said...

This article reminded me of what I saw when I was in the states over Christmas - there were TONS of houses on sale... I mean TONS! Some neighbors have had their house on the market for a year and are still waiting to sell it. Even Americans kept their money tight during the holiday season, knowing of the recession forming in the economy. And while Americans keep their money in their pockets, Europeans are taking advantage of the strong Euro and weak dollar. And because there's so much hype about the economy right now, and the presidential elections, I know for a fact that many Americans are paying more attention to what the canidates will do about the economy when deciding who to vote for. Like Tyler said, the US will be able to pull through, and will take action to protect the economy as much as possible. Because if the US economy falls, a domino effect will most definitely occur.

Jamie Ng said...

Well, it is the spending habit of Americans which causes the downfall of their own economy. For example, Americans who cannot afford to buy expensive homes apply for loans and still get it although they actually do not qualify. When it is time or them to pay up and they cannot do so, the mortgage lenders and the banks are the ones who are affected. This lenient terms for loans should change in order to save the situation.

The US currency is getting weaker and other countries which are putting their savings in euro and other currencies are just making things worse.However, a weak dollar would make American goods cheaper and encourages exportation.

The world economy would most probably be affected. Although some say it would correct the imbalance, the Americans are a huge consumer of the world exported goods, and if the Americans get thrifty now, countries like China and India who are dependant on the US consumers will get affected.

matt--- said...

the metaphor in the article about the United states sneezing and the world getting a cold was a good representation of how the world relys on the US economy as a model and a main source of export for goods. Americans have splurged in their consuming and this has caused them to have bad creditt along with alot of other things. now they are having to watch their budgets and with fear of a recesion may not buy as much. when they dont buy as much,US doesnt import as much wich hurts other countries. Americans need to be consistent and not splurge their money.

Carolina said...

Well, what i picked up from the article was the close relationship between the US and the rest of the world. It looks like the US problem was caused by their own citizens and their habit of spending money they don't have. As for the consequences of that I would expect that the rest of the world would be harmed by a US recession, but the article says it might allow for weaker economies to grow stronger and to "correct the imbalance." We need to wait and see what happens in the US and in the world.

Federico said...

I actually take the side believing this recession as of now is mild and will not generate anything in the world other than less work and lower salaries. If this happens in the states I don't see a reason why the recession should get any more dangerous as people will then have to prioritize their money on their debts to continue forward and will help lower inflation and therefore balance back again USA's economic situation. In other new's, John Edwards today stepped down from candidature, felt like adding. Can't wait to talk about this in class.

santi c. said...

I completely agree with the metaphor that was previously mentioned about the US sneezing and the rest of the world getting a cold. It is clear that the world's economy is based on the actions taken by the US. I did think that the world would go down in an economic crisis with the united states, yet this article provided other possibilities. I found this article interesting because it let me know that economists predict that a US recession could affect positively other weak economies. In the middle of a disaster, a few countries could come out winning.

sam f said...

I found this article very interesting and scary at the same time. The article emphasizes on the idea that if the United States falls into an economic recession, most of the world's economies will suffer. This clearly shows the United State's role in the world's economy. The US is facing these problems because its consumers spend so much money. Because the consumers keep spending so much money, the dollar is losing value. As mentioned before, the dollar's loss in value will greatly affect the US and other leading economies, but it will also affect developing countries in a positive way. The dollar's lower value will make it possible for developing countries to purchase more American goods. I thought it was interesting how economists have different oppinions on the severity of the almost inevitable recession the US will face. Some believe that it will not greatly affect the economy, but only create some losses in jobs. Other believe that the US wont only "sneeze," but that it has a "severe case of pneumonia."

Estefi said...

As mentioned before by many, the metaphor used of the united states sneezing and the world geting a cold seems the best way to describe what is happening in the economy.


as the US economy gets affected the rest of the world is affected as well, although nto only negative, but possitive as well....

the last years many of us that went to the US for the holidays come back amazed for the prize change and how the dollar keeps increasing. but, as the economy gets worse, the dollar looses itsw value as well. which benefits us as "the rest of the world".

Michael said...

I liked how it gave optimistic outlooks, it does seem like America's economy has been overly strong for too long. This is a problem i see because it makes outsourcing labor too appealing, we need other countries to catch up and take the share then we can balance over consumerism with production.