The Warning

It’s a frightening thought that the economic break down could have been helped if people listened. Brooksley Born, a female chairperson at CFTC, a small government agency, tried to regulate derivatives, which would have made this break down not as bad. Who to blame for this? Some say Alan Greenspan and his committee.

Alan Greenspan, also known as “the Wizard” for his outstanding knowledge of the economy or at least his appearance of knowing all that he knew. Greenspan was an economist in the White House working with five presidents. He was well known and had renowned thoughts along with his committee members Summer and Rubin. Theses prominent men had similar views about Wall Street, essentially that the less government regulation the better. This made for an inevitable clash with Brooksley Born.

Born wanted to investigate the unregulated derivatives on Wall Street. The CFTC first found out about these large loans of money from Proctor and Gamble. But it was difficult to investigate because there was no record-keeping requirement. Overall, the market for derivatives was not well understood and only the people involved knew what was going on. By 1998 when the economy was booming, Greenspan, Rubin and Summer didn’t see the investigation to be necessary. When Brooksley tried to stop derivatives, the committee put out information to newspapers and congress saying they shouldn’t trust Brooksley. They lobbied hard, and congress believed them so no regulations were set.

 

Brooksley Born resigned and years later the economy collapsed with derivatives being a main point. Once a woman described as stubborn and difficult was know known as committed and dedicated. To this day Greenspan admits he was wrong and he had a flaw in his model of hands off.

No matter who is to blame for not listening to Born when she tried to regulate derivatives it’s unfortunate that nobody did. It’s also depressing to think the fact that she was a female had something to do with this. The economy and the business world is definitely not as male oriented but men still play the dominant role. 

RS: NES

Han Rosling’s statistics presentation and Peter Diamandis’s speech were both inspirational and interesting. It was interesting to see the remarkable progress in the past two hundred years in over two hundred countries. From 1810 when all the countries were sick and poor, to 1948 when the differences of the world were wider than ever up until today, life span has increased and so has income. Based on gathered information and the past progression, Rosling was able to share this and insure a positive outlook for the future.

The abundance in the future that Diamandis lectured about was also positive similar to Rosling’s. The negative media that begins the presentation is a good example of why we’re so pessimistic in addition to his explanation of the danger detector in the brain. Clearly, there are problems in the world and Diamandis does recognize them. But he also brings our attention to the fact that we are living during the most peaceful time ever. Thanks to technology, our world has been able to grow and prosper through the years. But now more than ever technology is playing a significant part in the great progression of the world. Communication is a point that no one could have ever predicted and health is about to explode to the unimaginable.

Overall, I thought both these videos were really good. The information in the second video gave positive examples to the outlook rather than past numbers. It will be interesting to see things like a device that can diagnose you and it’s good to hear an optimistic speech about the future.

RS Regulators Mount Up

Economics have played a pivotal role in our history and will always be significant. The video “Commanding Heights: The Battle of the World Economy” is an informative documentary explaining the different markets throughout history. From today’s globalization to inflation in the 1920’s and everything in between this video reveals different economic practices and how the history of economics has shaped our economy today.

            At some points in history capitalist systems were the only model, at other times communism seemed to be the idealistic system. No matter the governing factor, these ideas are the reason we are where we are today. Ideas from before World War I still shape ideas today. While socialism in Austria in 1919 seemed to be the promising structure, other ideas were bonced around. An example in the documentary compared prices to traffic signals. When you don’t have prices or traffic signals there is chaos. In Moscow in 1922 the state completely controlled the economy, when the “new economic policy” was implemented neighboring countries invaded. When times were bad in Vienna in 1923 the defeated government printed more money to try and make this better but only resulted in inflation. People would bring baskets full of money just to get a loaf of bread. The 1920’s in New York is a well known time in history. The twenties were booming until the stock market crashed and half the banks closed leading to the Great Depression. This lead to other countries economies collapsing, leaving millions out of work across the globe. John Keynes wrote about this economic crash specifically about what caused the great depression and what to do about it. The documentary explains things in this book are still things discussed in Macroeconomics and lay as the primary foundation for Macro. Back in America, Franklin D. Roosevelt created the New Deal as a reform to rebuild the economy, which stabilized industries. After these tough times countries continued to debate over government power and certain things worked for certain counties. When one third of the world adopted socialism the Cold War broke out as another war in History. The world then turned again toward planning and power.

            Throughout history their has been much debate over which governing system works best. I think history can speak for itself, not everything works for every country and not everything always works. There are still going to be good economic times and bad economic times. With a better understanding of how each country operates we can only hope economic wars won’t ruin countries or economies won’t crash. Nothing is predicable but judging by this video Keyne wrote an extremely intelligent novel in which we may need to revert back too rather than forgetting the simple things written in history. 

RS Spring Break : A Time For Reflection

            Economics has been an interesting class to say the least. From the stories about cock blocking to learning about CPI’s, there are a lot of memories form this class. I think my strongest memory has been the picture of the chicken McNuggets, also known as “pink goop”. Sorry it’s not economics related, but that picture is a strong memory and strong picture I can’t get out of my head. My strongest memory about an economic concept has been GDP. Probably because we had to read, write, and watch things about this and I got a thorough understanding of GDP.

            As far as blog post, my favorite has been the one about Katy Perry and learning where all the money is distributed. I found it extremely interesting to learn how record companies get barely any money, and how they’re trying to change that. I think I need to work on RS 5 – “Inside the Meltdown”, considering I haven’t really done it yet.

            This class has taught me how to focus. When we need to memorize the answers for the tests I used to find it extremely difficult. When I focus on the tests I can memorize them so quickly. 

RS 9: CPI

        

    This podcast about consumer price index was insightful in explaining how they get this number but I still don’t have a thorough understanding on exactly what this number means. As explained in the podcast, the CPI is an important number released monthly, telling us if the price in the US has gone up or down (facing inflation or deflation). With that being said, that was basically the only explanation of CPI.

         

   The podcast then discussed how the government figured out the monthly CPI. Interestingly enough, 450 economic assistants for the Bureau of labor statistics physically go to stores throughout the US and price different things. These items are chosen based on typical purchases of the typical household in America.  This strategy of having hundreds of assistants going out monthly to different stores seems a little tedious and I feel like there needs to be an easier way. Apparently, there isn’t and they find this necessary. Overall, I found this podcast interesting but not totally comprehensive.