Response
1. There are several speculated explanations to the beginning of the Great Depression. However, the generally credited cause was the failure or crash of the stock market in 1929. On Black Tuesday, October 29, 1929 is when the New York Stock Exchange crashed. Stock holders reported losing around $40 billion cumulatively (according to Martin Kelly’s article). Surprisingly, many nations response to the crash of the stock market also contributed greatly to the Great Depression. When the news of the stock market crash broke out, many countries increased their tariff rates (taxes on imported/exported goods), essentially stopping economic activity on a global level. As a result this spread the Great Depression around the world.
2. The current recession started because American banks were giving out loans to too many people that could not pay them back.
3. In the time of the Great Depression, governments would provide care to their citizens by developing social programs such as a primitive form of employment insurance, handing out food vouchers, and injecting money in their local economy to create jobs. Overall what they did in the 1930s were a great leap towards social reform, but it lacked the funding to really push them out of the Great Depression, only another World War would do that.
In the current recession, governments would inject stimulants into the economy hoping to increase employment and other things that will lead to future prosperity. I would consider the government response to the current recession a success, because there is nowhere near the amount of homeless people lining up on the streets waiting for government vouchers for food. So far my parents are still employed which is a good sign of it being somewhat successful.
4. The most notable difference to come out of the Great Depression for Canada was the newly introduced social reforms. Canada now developed a “cradle to grave” policy, as it took more responsibility for the wellbeing of its citizens through payment programs for unemployment and families. The government during the great depression also introduced the Bank of Canada, which was a way to monitor and regulate the supply of money through interest rates. The Great Depression also created many other federal parties, broadening the concepts of how to run Canada.
5. In the times of the Great Depression, the United States GDP decreased. Around the 1920s, the United States GDP peaked at around $1 trillion dollars. However, since they were in a depression, the dollar value went down and as a result so did employment and product. All these factors contributed to the new all-time low GDP of $600 billion (according to charted resources from Wikipedia concerning the Great Depression). The United States lost over $400 billion during the Great Depression.
Oddly enough, the GDP of the United States did not drop during the 2007 recession. Based on the information provided from the World Bank website, The United States went into the recession with a GDP of $14.062 trillion dollars. At the end of the recession (2009), the recorded GDP of the US was $14.119 trillion. This outcome was completely opposite to my initial guess. A logical explanation would be the plan of approach towards the recession. They must’ve applied what they have learned from their past dealing with the Great Depression, which led them better prepared to encounter the recession of 2007.
6. I think the Great Depression undoubtedly created the larger impression on the world. It took one of history’s greatest periods of prosperity, the roaring twenties, and flipped it upside down. No longer were citizens enjoying the prospect of their own motor vehicles, the rising star known as Hollywood, or their new found leisure time. The new reality was the vast line ups for meager government relief, unemployed young men loitering around the city and the screams of agony on every street corner. Living through the 2007 recession in Canada, I saw little comparable to the scenes described from the 1930s.
Sources:
http://en.wikipedia.org/wiki/Stock_market_crash
http://www.english.illinois.edu/maps/depression/about.htm
http://www.actionplan.gc.ca/eng/feature.asp?featureId=18
http://www.yesnet.yk.ca/schools/projects/canadianhistory/depression/depression.html
http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm
Sunday, April 10, 2011
Monday, April 4, 2011
Chapter 6
Article: http://business.financialpost.com/2011/04/04/oil-finds-new-floor-at-100/
Summary:
This article is about the current situation with the rising oil prices. More specifically, the article indicates the new floor price of a barrel of oil being at $100. The reasoning behind the new record high in crude oil prices is due to the high production costs and budgetary requirements in Saudi Arabia. In a previous point in time, the “fair price” for a barrel of oil for both producers and consumers was $75 a barrel. For the longest time, Saudi Arabia the leader of OPEC (Organization of the Petroleum Countries) has been looking for excuses and reasoning to increase the price of oil. One example would be the tampering with the supply of crude oil to manage prices. The crisis in Libya means that Saudi Arabia no longer needs to moderate prices to set up a long term demand for their oil amongst their consumers.
Connections:
The factor of aggregate demand in the article is price. After all, it is the price of oil that has changed, nothing else. The price of crude oil changed, because of the current riots in Libya and as well as the decisions made by Saudi Arabia, the leader of OPEC. As a result of the change in oil, the subsequent products and services that revolve around oil will also increase in price due to the new higher production costs. When consumers see the ridiculously high gas prices and other high prices, due to the increase of crude oil prices, their initial response is to spend less and save more for a rainy day or until there are discounts. The frugal nature to spend will result in an overall decrease in GDP.
Reflection:
Aggregate demand plays a proportionally large part in our every day spending routines. I feel that the factors really do reflect do decisions regarding when to purchase a product. When I have a surplus of disposable income I would usually be more liberal about purchasing goods for myself. However, during the summer when I lack disposable income, I tend to be smarter with my spending and budget accordingly. I personally believe that price is the strongest factor of aggregate demand. Too often are we turned away from products due to their triple digit retail price tag, looking for a cheaper mean of obtaining them or simply waiting for a sale to occur.
Summary:
This article is about the current situation with the rising oil prices. More specifically, the article indicates the new floor price of a barrel of oil being at $100. The reasoning behind the new record high in crude oil prices is due to the high production costs and budgetary requirements in Saudi Arabia. In a previous point in time, the “fair price” for a barrel of oil for both producers and consumers was $75 a barrel. For the longest time, Saudi Arabia the leader of OPEC (Organization of the Petroleum Countries) has been looking for excuses and reasoning to increase the price of oil. One example would be the tampering with the supply of crude oil to manage prices. The crisis in Libya means that Saudi Arabia no longer needs to moderate prices to set up a long term demand for their oil amongst their consumers.
Connections:
The factor of aggregate demand in the article is price. After all, it is the price of oil that has changed, nothing else. The price of crude oil changed, because of the current riots in Libya and as well as the decisions made by Saudi Arabia, the leader of OPEC. As a result of the change in oil, the subsequent products and services that revolve around oil will also increase in price due to the new higher production costs. When consumers see the ridiculously high gas prices and other high prices, due to the increase of crude oil prices, their initial response is to spend less and save more for a rainy day or until there are discounts. The frugal nature to spend will result in an overall decrease in GDP.
Reflection:
Aggregate demand plays a proportionally large part in our every day spending routines. I feel that the factors really do reflect do decisions regarding when to purchase a product. When I have a surplus of disposable income I would usually be more liberal about purchasing goods for myself. However, during the summer when I lack disposable income, I tend to be smarter with my spending and budget accordingly. I personally believe that price is the strongest factor of aggregate demand. Too often are we turned away from products due to their triple digit retail price tag, looking for a cheaper mean of obtaining them or simply waiting for a sale to occur.
Wednesday, March 2, 2011
Chapter 5
Article: http://www.nationalpost.com/news/slips+fears+fuel+inflation/4369383/story.html
Summary:
In summary, the article indicated is about current major North American markets and their reaction to the ongoing crisis in Libya and other oil-producing countries. In the situation right now, commodity prices have sky rocketed due to fear of the future. The price of gold has increased by US$21.30 an ounce and closed on Tuesday at US$1,431.20. Crude oil is also faced with an increase of price, rising US$2.66, making the price of one barrel averaging around US$99.63. Analyst, Colin Cieszynski is concerned about the “political turmoil and rising inflation could have a negative impact on the global economy”.
Connections:
The increase in prices of crude oil and gold is an example of inflation occurring. The specific type of inflation which this circumstance falls under is demand-pull inflation. The reasoning behind my conclusion of demand-pull was primarily due to the political turmoil situation going on right now. Investors are buying more gold and oil as a haven of investment, because in times of strife those commodities tend to increase, in return granting the investors, who bought those stocks and possibly bought them on margin, profit. With the modern marvels of media, the news concerning the turmoil in Libya is no well kept secret. As a result, all seasonal investors are informed and hastily invest in those commodities, and an increase of demand results in an increase of prices in those sectors. It is not an example of cost-push inflation, because there is no evidence that the oil supplies in Libya are draining out. If they were draining out, the manufacturing costs would increase and the following inflation of oil would be cost-push inflation.
Reflection:
As an economic indicator, inflation is probably not the best one available. Too much of inflation is determined by a psychological factor, whether it be fear of the future or the mind of an investor. Like the article cited, the increase of gold and oil on the Toronto Stock Market indicates that inflation has occurred, but the inflation does not necessarily mean that our economy is doing bad or good. It was purely based on the investor’s mindset to buy gold as a haven for times of turmoil. Inflation is more of a cause of economic hardship, rather than a precision indicator of it.
Summary:
In summary, the article indicated is about current major North American markets and their reaction to the ongoing crisis in Libya and other oil-producing countries. In the situation right now, commodity prices have sky rocketed due to fear of the future. The price of gold has increased by US$21.30 an ounce and closed on Tuesday at US$1,431.20. Crude oil is also faced with an increase of price, rising US$2.66, making the price of one barrel averaging around US$99.63. Analyst, Colin Cieszynski is concerned about the “political turmoil and rising inflation could have a negative impact on the global economy”.
Connections:
The increase in prices of crude oil and gold is an example of inflation occurring. The specific type of inflation which this circumstance falls under is demand-pull inflation. The reasoning behind my conclusion of demand-pull was primarily due to the political turmoil situation going on right now. Investors are buying more gold and oil as a haven of investment, because in times of strife those commodities tend to increase, in return granting the investors, who bought those stocks and possibly bought them on margin, profit. With the modern marvels of media, the news concerning the turmoil in Libya is no well kept secret. As a result, all seasonal investors are informed and hastily invest in those commodities, and an increase of demand results in an increase of prices in those sectors. It is not an example of cost-push inflation, because there is no evidence that the oil supplies in Libya are draining out. If they were draining out, the manufacturing costs would increase and the following inflation of oil would be cost-push inflation.
Reflection:
As an economic indicator, inflation is probably not the best one available. Too much of inflation is determined by a psychological factor, whether it be fear of the future or the mind of an investor. Like the article cited, the increase of gold and oil on the Toronto Stock Market indicates that inflation has occurred, but the inflation does not necessarily mean that our economy is doing bad or good. It was purely based on the investor’s mindset to buy gold as a haven for times of turmoil. Inflation is more of a cause of economic hardship, rather than a precision indicator of it.
Thursday, January 20, 2011
Chapter 4 Blog
Article: http://www.financialpost.com/Corporate+fight+heats/4100993/story.html
Summary:
The cited article is a brief update on the current corporate tax cut dispute that is occurring amongst the federal government of Canada. Currently, the federal government is pursuing the final phase of their 5 year corporate tax cut plan, but is seeing strong opposition by the Liberal party. The reasoning behind the federal government’s decision on decreasing the corporate tax cut was to create more jobs and investment opportunities in Canada, boosting the economy. However, the liberal party disagrees with the federal government and claim that “the tax relief is no magic solution for stoking job creation and increased investment” The liberals are now securing a firm ground on opposition to the new plan in a possible election concerning this, noting that this is not the correct approach when the federal government is still in a deficit.
Connections:
The current struggle for the correct approach on the corporate tax system is a viable example for the key concepts engraved in chapter 4 of our economy textbook, which is about the overall involvement and actions of government in the economy. Since taxation is one of the more notable controls of the government, it is elementary to see the connection between the article and the concepts involved. Further analysis could be made on the difference between the federal and provincial, yet another core concept of the chapter. It demonstrates how provincial governments do not have any power in this struggled to control the corporate taxes. Provincial governments are more responsible for the healthcare, and education of their own assigned region, rather than affairs that concern the country as a whole.
Reflection:
This article was a very good example to show the involvement and struggles of government intervention in an economy. In my opinion, it gives more depth to the final decision that governments make, whether you agree or disagree with them. It shows the consideration and care that goes into the final decision of the government. Referring back to the argument about decreasing the corporate tax, I would have to side with the proposition against the decrease of corporate tax. I am not convinced that merely decreasing the amount of tax a corporation must pay will increase their willingness to hire more employees; it is indeed no magical solution for creating jobs in my opinion.
Summary:
The cited article is a brief update on the current corporate tax cut dispute that is occurring amongst the federal government of Canada. Currently, the federal government is pursuing the final phase of their 5 year corporate tax cut plan, but is seeing strong opposition by the Liberal party. The reasoning behind the federal government’s decision on decreasing the corporate tax cut was to create more jobs and investment opportunities in Canada, boosting the economy. However, the liberal party disagrees with the federal government and claim that “the tax relief is no magic solution for stoking job creation and increased investment” The liberals are now securing a firm ground on opposition to the new plan in a possible election concerning this, noting that this is not the correct approach when the federal government is still in a deficit.
Connections:
The current struggle for the correct approach on the corporate tax system is a viable example for the key concepts engraved in chapter 4 of our economy textbook, which is about the overall involvement and actions of government in the economy. Since taxation is one of the more notable controls of the government, it is elementary to see the connection between the article and the concepts involved. Further analysis could be made on the difference between the federal and provincial, yet another core concept of the chapter. It demonstrates how provincial governments do not have any power in this struggled to control the corporate taxes. Provincial governments are more responsible for the healthcare, and education of their own assigned region, rather than affairs that concern the country as a whole.
Reflection:
This article was a very good example to show the involvement and struggles of government intervention in an economy. In my opinion, it gives more depth to the final decision that governments make, whether you agree or disagree with them. It shows the consideration and care that goes into the final decision of the government. Referring back to the argument about decreasing the corporate tax, I would have to side with the proposition against the decrease of corporate tax. I am not convinced that merely decreasing the amount of tax a corporation must pay will increase their willingness to hire more employees; it is indeed no magical solution for creating jobs in my opinion.
Thursday, November 4, 2010
Chapter 2 Blog – Demand and Supply - Sony shares jump on Apple takeover talk
Article: http://www.vancouversun.com/business/Sony+shares+jump+Apple+takeover+talk/3727709/story.html
Summary:
Compacted, this article gives a speculated answer to the increase of Sony shares. On Tuesday, Sony shares have seen a 3% increase in value. One speculation induces the possibility of Apple being in the mind set to buy out another company, with potential partners being; Adobe, Disney, and with a highlighted note on Sony. However, a Sony spokesman said: “We cannot comment on rumours or speculation.” On the other end, in conference call done with Steve Jobs, a question was asked about the current intentions of Apple with its presently $51-billion in cash. Retaliating to the question Steve felt that the company should keep their resources until necessary, for there are possibilities of one or more strategic opportunities in the future. Inevitably, there are also speculation on the rumours of Apply buying over Sony to be false, due to the Japanese market and the ongoing competition. Sony shares have been its highest trading volume since July 30th.
Connections:
In relation to the concept of demand and supply, this article relates very well. Presented with a rise in prices and an increase of quantity demanded, Sony shares have gone through an increase in demand, due to the consumers behaviours. If, this was to be drawn into a supply and demand graph, we would see the demand curve reposition toward the right side to indicate an increase of demand. As for the equilibrium of the graph, it would also shift to the right and accommodate for higher prices and quantity traded. Reasoning to the increase of demand for Sony shares would be the speculations of Apple buying over Sony. To relate to the textbook, the speculation could be categorized as a factor of demand, specifically as an expectation of future prices.
Reflection:
Relating textbook examples with real life instances allowed me to realize how commonly used are the concept of supply and demand. The idea of Sony and Apple merging together is very exciting news to this biology nerd. Apple, which dominates the American market with their phones and laptops, working conjointly with Sony, a big producer in the Japanese market, could perhaps be the beginning of new product that would incorporated the unique patents and technologies of both companies into something extraordinary. There could also be more than the sole purpose of creating a new product, I would assume that there are intentions to unite and expand their products from Japan to American and from America to Japan, creating an international company with roots from the two parts of the world leading in technology advancement.
Monday, September 20, 2010
Chapter 1
Summary:
This article is about Scotiabank’s decision to purchase a Brazilian bank and expanding their services across South America. The name of the South American bank is “Dresdner Bank Brasil S.A”, and at the end of 2009, it was reported that this bank had assets around $400 million US and about 50 employees. The justification of Scotiabank’s purchase is to become the only Canadian bank in Brazil with a multiple bank license and to increase their presence in the oil and gas, power and mining sectors. The price of this transaction has not been announced, because Scotiabank claimed it to be “not financially material”, however, Mike Durland co-CEO of Scotia Capital, claims this trade to be a “tremendous potential for growth”.
Connections:
This article is a prime example of one of the main ideas of chapter 1, opportunity costs. Basically, opportunity costs are the expenses taken when performing any decision. For example; when you suddenly have a craving for pizza, the money you spend on your pizza, could have been invested in other things, such as investing. In fact, we run into opportunity costs every day, some deal with spending and losing positional money and some deal with gaining and losing other things. In the article, Scotiabank has suffered an opportunity cost by deciding to purchase Dresdner Bank Brasil S.A. The money Scotiabank used to purchase the Brazilian bank could’ve been doubling its value through investment. Therefore, Scotiabank has made a decision to purchase a Brazilian based company, and suffered an opportunity cost to use that money elsewhere.
Reflection:
Associating the article with the concept of opportunity costs, gave me a new perspective on life. I am now aware that everything I do, no matter what choice I make, there will always be an opportunity cost. I can also understand why major companies make decisions over the course of weeks or months, instead of instantly on the spot. In business, every decision comes with consequences or costs, and with that knowledge, every ripple must be analyzed to find the most efficient and least costly way to perform. With a new mind set, I am now able to tackle choices with a more business approach, rather than being a typical consumer.
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