Chapter 10 Blog

http://www.thestar.com/business/article/643821

Summary:

In this article, it explains that GM has finally declared bankruptcy on June 1^st 2009. In the past, GM was one of the car manufacturers that were doing very well with their sales. However, as the recession hit and the competition increased, GM’s sales have decreased since there are cars that are more efficient than those in GM. Although the President of the United States, Barrack Obama, still decides to reconstruct GM and believes that they will make profit, about 66 percent of the people living in the United States oppose the idea to bail out GM with their tax money. At the moment, brands like Honda and BMW are preferred. Even though this is the case, United States have contributed $72 billion and Canada has contributed $9.5 billion to reconstruct GM.

Connections

This has connections to chapter 10 because every car company has their own way of selling their products. For example, Toyota was the first brand to sell and discover hybrid cars. This would result in them promoting their hybrids more, thus, people will have an alternative decision to save on gas. As a result, GM was not able to keep up with the competition and their cars didn’t appeal to as many people as compared to the foreign cars. In other words, the advertising methods as well as the new technology of cars in foreign brands exceeded those of the GM Company. This resulted in GM declaring bankrupt because they were unable to keep up with the competition. In other words, the decisions that the other companies have made surpasses those of the GM ones.

Personal Reflection

If I am to vote if GM should get bailed out by our taxes or not, I would go with the majority of the people which is not to bail them. I believe that spending so much money to reconstruct one car company while we have so many other brands is not worth it. Moreover, after spending so much money to rebuild GM, we aren’t even sure if it will turn out to be profitable. Plus, it seems that people feel more confident about buying hybrids these days because gas is so expensive and that environmental issues are big topics at the moment. Also, Toyota seems to be doing very well because they are able to convince people that hybrids are worth their money these days. For example, when you step on the brake while driving one, the battery starts recharging itself. This may be one of the many reasons people find these cars appealing since they don’t need to buy things like extra chargers. If we look at where GM is, they do not seem to have anything special that will attract customers like the hybrids.

Chapter 8 Blog

http://www.theglobeandmail.com/servlet/story/RTGAM.20090416.wfranceeconomy0416/BNStory/crashandrecovery/home

Summary

This article talks about the fact that most European countries were hit hard by the recession. However, France was one of the countries that were able to dodge the severe damage done to most of the other countries. However, this does not mean that France was not harmed by the recession at all. As a matter of fact, the country is urging the President Nicholas Sarkozy to make structural reforms to make the economy more dynamic. Although France’s GDP dropped by 1.2 percent, it wasn’t as bad as Germany’s drop of 2.2 percent and 1.4 percent drop in Britain. Even though France is in better shape, it seems as though Germany will recover at the same rate as France by 2010. Moreover, Germany and Britain were expected to recover faster than France in the long-run. This is because France has Disinflation and the rigid wage structure, which makes it hard to adjust the salaries. Moreover, the laws in France make it hard for businesses to fire workers which isn’t a good sign in an economic downturn. Also, house prices in France had increased by a lot before the recession unlike the prices in Britain and Germany. In other words, the consumers owning property in Britain and Germany wouldn’t be hit as hard. Overall, France is in good shape at the moment, but in the long run, France will recover at a slower rate compared to countries such as Britain and Germany.

Connections

Since this chapter is all about the Stabilization Policy, this chapter can tell us why France was able to do so well to avoid severe damage to the economy during the recession. The government had planned to take many steps with their stabilization policy. One thing that they have decided to do is to make labour contracts more flexible, as well as making the laws less strict so then the employers are more comfortable with hiring new workers. Also, the government has considered dropping prices so people would feel richer; thus, they would spend more money making the economy better. As a matter of fact, people’s wages in France are expected to rise by the end of this year, which once again makes people feel wealthier. Also, Costly social charges, which help consumers during the downturn, discourage companies from hiring. Although we are in a recession, France has planned ahead in order to pull their country out of the recession as soon as possible.

Personal Reflection

I agree that there are many policies that need to be changed in France. I believe the one that is the most damaging to the French economy is the fact that employers are afraid to hire people because of the strict policies. The government should be more lenient with that policy. If employers are afraid to hire people, that would create a higher unemployment rate. Thus, they would not be able to get out of the recession as fast as everyone else. However, it is a relief to see that the government is planning to do that by the end of this year. Since France wasn’t hit as hard by this recession, I believe that they will be able to change the laws a bit and get back on track to get out of this recession

Chapter 7 Blog

http://news.bbc.co.uk/1/hi/business/7724215.stm

Summary:

In the current recession, banks are having many problems keeping up with the economy. Banks are considering another tax reduction of 0.5%. This banking crisis can be comparable to the one in World War I. Apparently; this recession is expected to continue for quite a long time according to the Bank of England. Banks are urging the government to contribute billions of dollars help us get out of this recession. Banks as well as the government is trying to find a solution to this recession, but we all know that it will take lots of time before we can get ourselves out of it.

Connections:

This chapter is all about banks and money. This article talks about the fact that banks are trying their best to get out of the recession. However, it will take a lot of time. Also, 7.2 talks discusses if banks can actually go bankrupt. Well, the main reason we are in a recession is because one of the banks in the United States went bankrupt. Also, the article as well as the chapter talks about tax reductions regarding banks. Basically, the banks are doing their best to charge less interest on their loans during this financial crisis.

Personal Reflection:

I agree that this recession is going to take some time to get out from. However, I don’t think that it will take as long as the Great Depression. We have seen a recession before, so I believe that we can find different solutions or reuse the ones that we had in the past. The tax cuts will help, but I don’t think it is enough to pull us out. One strategy I read on a website is to get people to spend more so the money can be invested in the country.

Chapter 6 Blog

http://www.economist.com/displaystory.cfm?story_id=13248177

Summary:

Many banks such as the Bank of England are trying to lower interest rates to help with the current recession. In fact, the Bank of England has dropped its interest rate from 5% to 0.5% since October of 2008. As we all know, two percent inflation is supposed to be considered healthy. However, it is expected to decline to 0.7% by the end of 2009. Moreover, unemployment rate is also expected to drop even further than it is currently at. With this being said, GDP would also drop. As a matter of fact, banks anticipate that the GDP will drop another three percent when this year comes to an end. Although banks around the world are trying to come up with solutions to this recession, the GDP is not looking too good all over the world.

Connections:

This chapter is all about the Gross Domestic Product (GDP), which refers to the value of goods and services produced in a country in a given year. Since we are in a recession, the GDP is dropping which results in unhealthy inflation (above or under 2%) and unemployment rate rising. Banks are currently using the Monetary Policy to lower interest rates to help with the recession. This policy is trying to get households to save less and spend more in their country so the economy and GDP can become healthy again. People may think that a country spending a bit more won’t do anything, but I have heard that the money spent in a country can be invested about four times the original amount.

Reflection:

I think that this interest rate cut back isn’t going to be enough to get us out of the recession. However, if new ideas keep building up to get us out of this problem, the insignificant things might add up and make a significant one. Like one of the economists says, “Even if the central bank’s bold new strategy is not a sure remedy, it is still worth trying.” I totally agree with him because things are only going to get worse if no action is taken. However, the bank’s action at least gives us a chance to get out of the recession and/or prevent things from getting worse.

Economics Chapter 5

http://www.cbc.ca/money/story/2009/02/06/januaryjobs.html

Summary:

As most of us know, we are currently in a recession. When a recession occurs, there is usually a high rate of unemployment. Current statistics have shown that there are many job losses. As a matter of fact, the job losses exceed the numbers of the 1980s and the 1990s. In just January alone, the unemployment rate went up by 0.6% to a current 7.2% unemployment rate in Canada. This unemployment rate is partly because of the 213,000 jobs that were lost ever since October 2008. To make matters worse, economic experts expect that this drop will continue for another six months or so. Although the unemployment rate is expected to increase, companies such as the Bank of Canada declared that they will cut interest rates to help solve the problem of this recession and the unemployment rate.

Chapter 5 Connections:

This is related to chapter 5 because it does talk about unemployment rates and the labour force. A survey known as the Labour Force Survey is complied monthly based on 50,000 households across Canada. This is used to determine the employed and unemployment rate. We can say that the survey in the present ended up with a high unemployment rate due to this recession. In fact, there is a formula for unemployment rate and that is: unemployment rate= unemployed / labour force. Out of all the types of unemployment, I believe we are going through a demand-deficient unemployment because many people are now purchasing fewer goods (not to mention, inflation), because of this recession; thus, the employers will have to lay off workers due to the fact that they are having difficulties selling their product. As a result, there is currently such a high unemployment rate in Canada.

Personal Reflection:

Being in the current labour force, I have witnessed many people that have been laid off. I also believe that the unemployment rate will increase for another six months or even longer. Canada usually has a higher unemployment rate compared to the United States, but right now, the unemployment rate for Canada is actually lower than the United States. Although there have been job loses in Canada, when we compare to our neighbours, the United States, they are doing worse than us. However, if we compare the unemployment rates of 1980s and the 1990s to the present, we actually have a lower rate right now. Overall, I believe that this is currently an economic drawback and not a crisis; therefore, I think jobs will be available to the unemployed within a year.

Chapter 4 Blog

http://online.wsj.com/article/SB123180759988175649.html

Summary:

In this article, it talks about the “death tax” which is a tax that family members have to pay due to the death of an owner. Mr. Obama wants to bring this estate tax back which was supposed to expire in the year 2010. He states that this “death tax” will create new jobs, but the author thinks otherwise. Although this tax is targeted towards the wealthy people such as Bill Gates, these rich people have ways to avoid the taxes which ultimately means that the lower and middle income people pay it. This is a problem because those two groups of people (lower and middle class) are responsible for creating new jobs, but if those people can’t pay the taxes, then there will be no new jobs created. Also, studies have shown that countries are better off without a “death tax” because many countries remove this tax so there would be more jobs. Although the government thinks that they are creating more jobs for the people in the United States, the results show otherwise.

Connections:

Since chapter four talks all about taxes created by the government, this article is related to this chapter. Since revenue is made as a result of taxes, the estate tax also creates revenue. Also, there the ability to pay concept can be applied to this article. Since the wealthy have the ability to avoid much of the estate tax, some argue that taxes should be paid according to their incomes and all their personal wealth (e.g. real estate, stocks, bank accounts, etc.) This is also somewhat related to a regressive tax because the poorer people end up carrying the burden of this “death tax” while the wealthy people find ways to evade it which makes the poor people pay a higher percentage of it.

Reflection

After reading this article, I have to agree with what the author says. If studies shown that eliminating this “death tax” do indeed help create new jobs, I think Mr. Obama should consider getting rid of this estate tax. Also, Countries such as China and other poor countries eliminated the “death tax” and as a result, new jobs were created. The only countries to pay the “death tax” are the United States, New Zealand and the United Kingdom. In my opinion, there is no point continuing this tax because most of the people the country is taxing are the poor people. If the lower and middle class people are the ones that are looking for the jobs, giving them more taxes to pay isn’t going to help them one bit. Overall, studies as well as results are displayed that the “death tax” is better off excluded.

Chapter 3 Blog

http://www.economist.com/business/displaystory.cfm?story_id=12638642

Summary:

Recently, car industries such as GM and Chrysler are requesting loans from the government. This is a problem for both the United States and in Europe. The European government is considering giving car manufacturers €40 billion ($51 billion) in soft loans. The GM Rick Wagoner said that they need the loans fast or they may not be able to pay off their bills by the end of the year. Although Ford seems to be doing better than Chrysler and GM, chief executive Alan Mulally, predicts that Ford will also go bankrupt due to the fact that this will be a big impact on the suppliers. Some such as the European Commissioner believe that the big car producers should receive help because they are important and traditional car makers. However, Neelie Kroes (competition commissioner), believes that giving loans to these car makers will be unfair for the other car makers out there.

Chapter three connections:

This article talks about government involvement which is what chapter three is about. Even though car companies such as GM and Chrysler are privatized companies, they are still requesting money from the government to avoid bankruptcy. As a result, this will have negative third-party effects on the people that are living around the area because of the pollution caused by the cars. If the government loans the money to these companies, then it will be unfair to other competitors. On the other hand, many small car companies depend on the these three big businesses to operate. However, if the government does not loan money to them, then there are many jobs that would be lost. All in all, both choices lead to bad consequences.

Personal Comment:

Since i lived in Vancouver for all my life, i have seen many GM and Chrysler cars. Although the government should not lend money to private companies on normal circumstances, I think they should in this Situation. In my opinion, this is not just about saving the big companies, but instead it is to protect the people's jobs. Since we are in recession, I believe that the car makers should receive help to avoid going into a more serious state we are in now. I have seen commercials a few months ago that were advertising cheaper cars for about $18,000, but now they go as low as $8,000. I have never seen a new car sold for such a low price in my life time before. Also, if the companies do go bankrupt, the other car makers might not have such smooth time either because many people will lose their jobs. As a result, there will be a decline of consumers that are going to buy vehicles. Even though these three companies are American owned, there are many factories built in Canada (mostly in Ontario). As a result, these companies provide jobs for the Canadians and if these three major car companies were to close down, that will leave not only Americans unemployed, but will also leave many Canadians unemployed too.