The Lulay School

Kohl's provides national employment boost

2010-09-29T07:44:00.000-07:00

http://www.cnbc.com//id/39416825

Kohl's to open 21 new stores and service center this fall. The new stores will add 4,000 jobs nationally.

Stimulating Employment = Ending unemployment benefit extensions

2010-08-09T13:00:00.000-07:00

http://finance.yahoo.com/tech-ticker/man-receiving-unemployment-benefits-refuses-over-a-dozen-job-offers-535306.html;_ylt=Aq.g2NzjWpoLo9MPHDV4Eq.7YWsA;_ylu=X3oDMTE2NHEwbWs1BHBvcwMxMARzZWMDdG9wU3RvcmllcwRzbGsDbWFucmVjZWl2aW5n?tickers=^dji,^gspc,spy,tlt,^ixic,qqqq&sec=topStories&pos=8&asset=&ccode=

The article points out that the number of job openings has risen at twice the rate of hires since the middle of 2009. You would think that with the as much as 10% of the American labor force unemployed, job openings would be filled almost immediately, as people flood the openings with resumes. That is clearly not the case however, and the problem simply lies in adverse incentives. Since individuals understand that the current administration will continue to extend unemployment benefits, there is no incentive to return back to work when you can do nothing and pocket $300 a week (especially if you can not make much more being employed).

If you want the unemployment situation to improve, stop extending unemployment benefits, and communicate that benefits are meant to be a temporary safety net for those in transition.

My issue with Gov't debt...The concise version

2010-07-12T21:08:00.000-07:00

Debt = paying interest = printing money = inflation = increased interest rates = disincentive to invest = stagnation

Airline bailout?

2010-04-21T10:53:00.000-07:00

http://finance.yahoo.com/news/Airlines-lose-17-billion-ash-apf-3552930937.html?x=0&sec=topStories&pos=6&asset=&ccode=

Looks like the fear of creating malign incentives associated with the bailout package is coming to fruition. Airlines announced today that they feel a government bailout is in order due to their lost revenue stemming from the Icelandic volcano eruption.

Seems to me that owning a private corporation involves substantial risks. A business owner must take into account these risks in the decision-making of its operations. Natural disasters, while rare, are a risk that must be taken into account. Prudent business owners own flood and fire insurance for the rare instance that these disasters may strike. Airlines must be prepared for such inconvenient situations. Setting aside profits as an insurance policy would be a prudent mechanism for hedging against disasters like this in the future. It is not the government's responsibility to subsidize lost revenue streams due to the unpreparedness of privately owned businesses.

Towards nationalized health care

2010-03-22T14:50:00.000-07:00

http://finance.yahoo.com/tech-ticker/healthcare-reform-bill-is-just-the-latest-step-toward-nationalized-healthcare-446767.html?tickers=%5EDJI,%5Egspc,ixj,wlp,aet,pfe,unh&sec=topStories&pos=9&asset=&ccode=

"If you look at long-term health spending trends, the government's share of health expenditures has consistently risen over time, Gross says. Insurance companies can't profitably insure seniors, so Medicare has taken over that role. Insurance companies can't profitably insure poor people, so Medicaid covers that pool. As our companies struggle to remain competitive in a world with skyrocketing healthcare expenses, the government will increasingly be forced to pay for those who were once insured by their employers. And so on." - Daniel Gross, Economics Editor at Newsweek and a columnist at Slate.

For better or worse...We shall see

Author argues, "Don't send your kids to college."

2010-03-03T12:17:00.000-08:00

http://finance.yahoo.com/tech-ticker/don%27t-send-your-kids-to-college!-%22it%27s-a-scam%22-james-altucher-says-434365.html?tickers=^GSPC,spy,COCO,APOL,DV,ESI,^DJI&sec=topStories&pos=9&asset=&ccode=

In the article, hedge fund manager James Altucher argues that due to heavier debt loads from higher tuition rates, the cost of post-secondary education is no longer worth it. He states, "There's a lot of evidence to suggest that motivated kids are going to make money whether or not they go to college," says Altucher, managing partner at Formula Capital. "So teach your kids how to be motivated. Teach your kids how to sell a product, build a network of connections. That's going to be far more valuable."

While many graduates graduate with a large debt load ($23,000 on average according to the article), the earning potential of a career which requires the skill base of those with degrees easily covers the sum stated above. Take a degree in Economics for example. The median starting salary for an Economics graduate is about $50,000. In contrast, the median salary for those with a high school diploma is only $37,000, which would obviously be much lower if the figure was starting median salary.

Record-setting deficit pace

2010-02-17T12:10:00.000-08:00

http://finance.yahoo.com/news/Federal-deficit-at-43069-apf-64628164.html?x=0&sec=topStories&pos=2&asset=&ccode=

Through the first four months of the budget year, the United States' $430.69 billion deficit is on track to shatter last year's $1.42 trillion record. Can the United States' sustain such enormous deficits? I think the answer in the short run is yes; however, large deficits are not a responsible way to run government in the long run. Deficits create leverage for foreign countries that own our debt and make inflationary concerns more prevalent due to the printing of money to finance interest payments.

ECONOMICS 101

2010-02-01T10:29:00.000-08:00

http://gregmankiw.blogspot.com/2010/01/economics.html

Gordon Boronow, Assistant Professor of Economics at Nyack College gives students the basic tenets of Economics in a clever acrostic format:

Ten Key Principles in Economics

Everything has a cost. There is no free lunch. There is always a trade-off.

Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff.

One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.).

iNcentives work. People respond to incentives.

Open for trade. Trade can make all parties better off.

Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.

Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)

Concentrate on productivity. A country’s standard of living depends on how productive its economy is.

Sloshing in money leads to higher prices. Inflation is caused by excessive money supply.

!! Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation.

Watchdog: Bailouts created more risk

2010-01-31T08:32:00.000-08:00

http://www.philly.com/philly/wires/ap/business/20100131_ap_watchdogbailoutscreatedmoreriskinsystem.html

The article makes public what we already knew: the $700 billion bailout created more risk for another finacial crisis in the near future.

"Since Congress passed the $700 billion financial bailout, the remaining institutions considered "too big to fail" have grown larger and failed to restrain the lavish pay for their executives, Barofsky wrote. He said the banks still have an incentive to take on risk because they know the government will save them rather than bring down the financial system."

Economists warned of the dubious incentives created by the bailout, but officials refused to listen. Those banks "too big to fail" have no incentive to decrease the risk of their business operations if they know the government will always be there to lend a helpful hand (of cash). The government, by describing these banks as "too big to fail" in the first place, have set themselves up for an ominous future of bailout after bailout unless the incentives are corrected.

To create better incentives, force these large institutions to create their own bailout account. In times of surplus, the company is forced to set aside a certain percentage of profits into this account. Thus, when institution faces a crisis, they have their very own bailout fund ready to finance their risky habits. Their must be some premium for risk, and this sort of policy creates such a premium. Smaller banking institutions better understand risk management, and that is why they have remained solvent throughout this entire crisis.

A look into U.S. Unemployment

2010-01-27T19:51:00.000-08:00

Greg Mankiw, Professor of Economics at Harvard University provides a little-known fact about the effect of the stimulus package on unemployment - it is doing very little. The general public should understand these insights.

http://gregmankiw.blogspot.com/2009/05/accountability.html

A look into spending and the federal budget

2010-01-27T19:36:00.000-08:00

$187 million in gov't funds to aid in fuel efficiency research

2010-01-11T17:18:00.000-08:00

http://finance.yahoo.com/news/US-grants-187M-for-fuel-apf-4049770432.html?x=0&.v=5

The U.S. Gov't has released a statement today announcing $187 million in funding for nine projects across the country aimed "to significantly increase fuel efficiency in heavy trucks and passenger vehicles..." Cummins Inc. will recieve $40 million of the funds to aid in the research and development of a more efficient and cleaner diesel engine. The infusion of money from the government is expected to be matched by the companies which are recieving the money; however, the article does not specify how this expectation will be enforced.

While the amount of waste within the administration's stimulus package has been nothing short of fanatical, this influx of research and development funds are a great stride in the right direction. I am an ardent and stringent supporter of research and development spending, as this type of investment consistently yields high returns on principle. There is no doubt that this research will culminate in quality products which will deliver better fuel efficiency and cleaner emissions, even in heavy duty vehicles (where the research has lagged). The demand for such products is evident already, but a tough economic climate has prevented automotive companies the ability to spend heavily in R&D. High demand will continue as higher fuel prices become inevitable in the future. This assistance from the government will allow this action to take place on a systemic scale in the United States, which will help make U.S. car manufacturers more competitive in the long run. The government will see a return on this investment as well due to the creation of jobs, the extension of the tax base, and the setting a technological framework for future expansion of the economy.

"Make Work" policies misguided

2009-12-11T06:17:00.000-08:00

http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_656771.html

This is an article written by a George Mason Economics Professor. It outlines the idea that the government initiative to "create" jobs is severely misguided because the value produced from such jobs is less than what is paid out in the form of wages. In other words, the value produced from such positions is less than what is paid. Thus, the a federal program to create jobs is nothing more than a wealth transfer between the government and the public.

Wealth transfers do not spur innovation or drive entrepreneurship, but rather create large inefficiencies in the market. Public spending can certainly be beneficial, but the funds need to be pushed into incentive driving entities which produce large returns on investment such as research and development in the sciences. The effect of such spending is new products, medicines, and means of production. And once these new entities are introduced, people are needed to manufacture them, test them, and distribute them. That certainly seems like genuine job creation to me. The wealth gained from these jobs will promote national growth in GDP unlike the pointless wealth transfers created by current federal spending. The role of government should be to assist in the creation of incentives to promote innovations in the market mechanism.

Demand for American goods increasing, supporting recovery

2009-12-10T15:45:00.000-08:00

http://finance.yahoo.com/news/Stocks-rise-as-trade-deficit-apf-2110216808.html?x=0&sec=topStories&pos=2&asset=&ccode=

The United States trade deficit has declined for the sixth straight month providing a base for domestic recovery. Exports in November increased by 2.5%, a substantial gain indeed. The increase in exports has been fueled by a weak dollar spawned by a near zero federal funds rate.

The increase in exports has been a very positive economic indicator. The U.S. still operates with a negative net export of $32.9 billion. Despite this, an increase in world demand for U.S. goods has certainly helped to stabilize employment.

The multiple indicators of a modest and slow recovery have spurred discussion of a rise in interest rates. If this occurs, the dollar will certainly strengthen as money is pulled out of circulation on the basis of increased saving demand and reduced investment demand. With a strengthened dollar, U.S. goods will become relatively more expensive in the world market, and U.S. exports will decrease.

We shall see how the months ahead develop...

Slow growth and sticky unemployment for 2010

2009-12-09T06:38:00.000-08:00

http://finance.yahoo.com/news/Slow-growth-and-high-rb-95017842.html?x=0&sec=topStories&pos=8&asset=&ccode=

The UCLA Anderson Forecast Group suggest that growth will settle in at around 2 percent for 2010 while unemployment peaks at 10.5 percent and remains in double digits for most of the year. The group forecasts that the Fed will continue to pursue a low Federal Funds Rate in an effort to drive consumer investment demand. Bernanke is quoted as saying that the Fed will continue to keep benchmark borrowing costs low for some time until the economy regains its footing. Forecasters with the group suggest that normal 3-4 percent growth will resume around mid decade.

At this point, any growth is good growth. Just a couple of months ago, the United States' economy was in a negative growth situation. At this point, it seems that the economy is finding its footing, and sustainable growth is foreseeable. Sustainable growth is the key to this recovery. 2-3 percent growth should be the aim of this administration.

With that said, the Federal Funds Rate will need to be raised incrementally in the very near future in an effort to check inflationary pressures spurred from fanatical public spending and growth in the money supply. If this is not done, inflation will subdue any recovery that is evident.

President Obama's Continued Initiative to Create Jobs

2009-12-08T07:44:00.000-08:00

http://finance.yahoo.com/news/Obama-to-spell-out-new-apf-1476302163.html?x=0&sec=topStories&pos=1&asset=&ccode=

The pursuit of the current administration is admirable: put people back to work amidst an economy with >10% unemployment; however, the Neo-Keynesians calling the shots need to show some restraint. Obama's Administration has blown the national debt out of control even further than it was under Bush. What has all the spending done for us? In a country with a >$12 trillion national debt, how can you justify adding an additional $1 in less than a year?

I can certainly sympathize with genuine infrastructure spending, but the spending should be allocated as locally as possible. We have seen the inefficiencies that come from federal spending first hand. If the government is going to spend all this money, distribute it to the local municipalities so that they can spend the money where it is needed most. It seems completely illogical to allow the government to take over control of economic entities when it is inherently the most inefficient entity that exists. Would you allow a family member who was in extreme debt and was terrible with personal finances to take control over your accounts? I think not.

I believe in public spending that is genuinely geared towards legitimate infrastructure improvements (where are the rail networks in this country?) and military advancement. History has revealed that technological advancements (in all sectors) come primarily as a result of military and space research.

Unemployment, as a lagging economic indicator, will not recover for many months. This is a proclevity of the economy that has been well documented and researched for many decades. Make sure strong unemployment benefits are in place and focus your attention on growth, innovation, and creating incentives for advancement in small business. Employment will necessarily follow as a result.

New IRS incentive program brings in tax evaders

2009-10-14T12:39:00.000-07:00

http://finance.yahoo.com/news/7500-tax-dodgers-apply-for-US-apf-1422703713.html?x=0&sec=topStories&pos=4&asset=&ccode=

A new IRS tax program, which "promises no jail time and reduced penalties for tax cheats who come forward," has lured in 7,500 tax evaders. The program allows tax evaders to avoid jail time as long as they come forward and pay interest and fines before they are pursued by the Internal Revenue Service.

The program certainly seems beneficial on multiple fronts. Firstly, the IRS will be collecting more tax revenues. Secondly, the IRS will not have to spend as much money and effort in pursuing and prosecuting these criminals. Lastly, more evaders will not populate America's already grossly overpopulated prisons, which saves every taxpayer money.

Conclusion: Incentives matter

Monetary Policy to be tightened

2009-10-09T05:57:00.000-07:00

http://finance.yahoo.com/news/Bernanke-boosts-dollar-rb-4076435337.html;_ylt=Ajw9BDW8iOKTD0yRZLQmom27YWsA;_ylu=X3oDMTE1dGJqaTVrBHBvcwM4BHNlYwN0b3BTdG9yaWVzBHNsawNiZXJuYW5rZWJvb3M-?x=0&sec=topStories&pos=6&asset=&ccode=

It is promising to see Bernanke's comments on tightening monetary policy in the months to come amidst a slow recovery. The federal funds rate has been so low for so long that inflationary pressures are sure to be immense in the months and years to come. Inflation should be held in check for the majority of 2010 while the U.S. economy is still recovering and consumer spending sticks at relatively low historic levels. Beyond this however, the U.S. economy will face very serious inflationary pressures due to a bloated money supply and very low rates. If Bernanke and his boys at the Fed are going to keep the economy on some sort of leash in the years to come, interest rates will have to climb quickly while simultaneously pulling substantial sums of liquidity out of the market through the selling of government bonds. It will be interesting to see what happens in the months and years ahead, but I think Bernanke and his chairmen are preparing well.