I’ve written many business and economics-related columns this semester, which isn’t that surprising considering I’m a part of the respected Spear’s School of Business. I wonder, however, how many students really understand such issues and how they related to their lives personally.
Certainly everyone knows the importance of balancing checkbooks and not taking more debt than one can handle, but bigger economic issues and their consequences tend to be overlooked until they cause problems.
A year ago no political commentator could have predicted the return of the 1992 Clinton slogan, “It’s the economy, stupid.”
I’m sure James Carville thinks he’s a genius, but serious economic issues have been unaddressed for the entirety of Bush’s presidency.
Furthering soft money, deficit spending and tax reductions for the wealthy have effects, even if they take time.
Now we are left with a weakening dollar, a massive governmental bureaucracy and an ever more stacked wealth distribution.
The American middle class is having a war waged on its prosperity, and I don’t see any reason to think that any of the Presidential candidates will be able to address these issues.
And so we are left with the oft-maligned concept of personal responsibility. Now, I don’t believe in meritocracy — the great American mythos.
You can spend your whole life working hard, but that doesn’t mean your work will translate to wealth.
After all, your money can make you a better return than your labor can.
To preserve and grow wealth when inflationary pressures are prevalent, you must follow an aggressive investment strategy.
Interestingly enough, a Wall Street Journal article from April 23 suggests an investment that many overlook: an investment in your pantry.
Food prices are heading up, and the fundamental economics behind these increases are going to continue to be prevalent into the future.
To put it simply: the demand is outpacing the supply.
Whether that demand is caused by developing nations with exploding populations or ethanol manufacturers gobbling up corn crops, food will cost more.
According to the Wall Street Journal article, “The latest data show cereal prices rising by more than 8 percent a year. Both flour and rice are up more than 13 percent. Milk, cheese, bananas and even peanut butter: They’re all up by more than 10 percent. Eggs have rocketed up 30 percent in a year. Ground beef prices are up 4.8 percent and chicken by 5.4 percent.”
I wonder what will happen to the exploding food services industry around the U.S. as margins decrease and these costs are passed on to consumers. In any case, it would behoove graduating seniors to invest in a freezer.
As for the rest of the aggressive investment strategy, I recommend employing a certified financial planner. I don’t expect everyone to know how to properly manage money, so why not find someone who does?
I think our generation faces something new to America.
The old assumption that our lives will be better than our parents’ is no longer a good one. The paradigm has shifted. Your prosperity is your own to secure.
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“Now we are left with a weakening dollar, a massive governmental bureaucracy and an ever more stacked wealth distribution.”
A “weakening” dollar is not necessarily a bad thing–it might be bad for American tourists in Europe, but it is a misconception that a “weakening” dollar is bad for the economy. As for the “massive governmental bureaucracy”–call me crazy, but I’m pretty sure that existed long before W took office. And finally, the old wealth distribution cliche–there is plenty of reason to believe the supposed increasing wealth gap is a myth–countless articles in respected outlets such as the Wall Street Journal have addressed this.
Yeah, the economy can’t do billiantly all the time, and it’s not within the President’s or the government’s power to ensure a perpetually perfect economy. To quote Forrest Gump: “It happens.” Deal with it. No one is dying in the streets.
For a business major you sure are good at repeating the tired, worn-out, government-intervention-will-save-us cliches of the Democractic Party–maybe you should switch to Political Science?
One last thing–the demand for food is most certainly not “outpacing the supply.” There is plenty of supply–but when governments intefere with the food market by subsidizing their PC pet projects (ethanol), it distorts the market and causes people to suffer. This holds true for the EU as well, and their billion dollar CAP program that subsidizes a few French farmers at the world’s expense.
How is the weakening dollar not a bad thing?
Guess which currency everyone trades oil with? If you guessed the dollar, you win the prize. Thus, when the dollar weakens the price of gasoline escalates.
Since nearly every American market is affected by the price of gas, everything else gets more expensive. The value of the dollar is not just relative to other currencies. It is relative to products in both foreign and American markets. You can’t just pretend like a weakened dollar only affects people who wish to buy foreign products, because the global economy is too interconnected for the value of our dollar to be insulated against competition with other currencies.
Please expound on the myth of the wealth gap or at least provide a link.
I agree that the president often gets too much blame (and too much credit) for the economy, but in this case Bush’s wildly exorbitant expenditures with very little ROI have to be considered as one of many reasons for our economic failings. I mean, we are borrowing money for a war. This was a horrible idea. Thomas Jefferson reached this conclusion 200 years ago. Hell, even Ross Perot could have figured this one out. What happened to a balanced budget (something the president can do)?
Just to get you started, here is a link to one of the more recent columns on the subject of the Inequality Myth (there have been countless others over the past few years–this happens to be a myth which many people perpetuate without every actually doing any real research on the matter)–titled, appropriately enough, “The Inequality Myth,” by Brad Schiller, economist at American University, in March 10 2008’s Wall Street Journal:
http://online.wsj.com/article/SB120511125873823431.html
As for the other myth–that a “weakened” dollar is bad for our economy, here is an article, this one by another of those darned economists, Tyler Cowen, writing in the NY Times, called “The Dollar is Falling, and that’s Good News”:
http://www.nytimes.com/2007/12/02/business/02view.html
I am certainly not implying that posting these articles proves anything–I am merely trying to point out that there are presumably reasonable, intelligent experts who believe that 1)the “increasing income gap” is basically a myth, and 2)a falling dollar is not necessarily a bad thing.
Also, Kurt, while we’re here, I should mention the fact that you have repeated another economic myth in your posting: namely, that the war in Iraq is somehow to blame for our (exagerrated) economic woes. To quote Frederick Kagan, from a recent article at National Review (”Why Iraq Matters: Talking back to antiwar-party talking points”):
“the burden of the war on the American economy has simply not been heavy enough to have caused a recession on its own. The collapse of the housing bubble, the sub-prime mortgage crisis, rising oil prices (which losing the war will not lower), and a variety of other factors have been far more important in slowing the economy than any brake the war might have put on it. Defense spending as a percentage of total federal spending is now around 20 percent. In World War II, it ranged from 73 percent to 89.5 percent; in Korea it ranged from 32.2 percent (1950 — 51.8 percent in 1951) to 69.5 percent; and in Vietnam from 42.8 percent to 46 percent. In more context: at the height of spending on this war, defense spending was only 12.3 percent of all public spending (including federal, state, and local expenditures); in World War II the high was 82.1 percent; in Korea, 52.5 percent; and in Vietnam 31.3 percent.”
One more thing: if it’s true, and I believe it is true, that success in Iraq is of the utmost importance both for America and the world, then I believe that it is completely justified to pay for the war, even if it requires borrowing, and even if it might contribute to some minor economic woes. If you think Jefferson and Perot might disagree with me, then I must humbly, hypothetically disagree with their eminences Jefferson and Perot.
Justin, I’m astounded by whole utterly myopic you are. You focus in on one sentence and then dismiss me as a uninformed Democrat. I find it amusing that you think I’m suggesting that government intervention is needed, when elsewhere in the article I say things like, “I don’t see any reason to think that any of the Presidential candidates will be able to address these issues” and “Your prosperity is your own to secure”. But I suppose actually reading my article isn’t necessary when you can attack one sentence. I suppose I should respond:
More than just American tourists depend on the dollar. Those that have the smallest amount of the currency are the ones hit the hardest as their buying power lessens. Notice your article doesn’t address that issue at all. Considering the poor are likely to be spend a majority of what few dollars they have on food, this is a serious issue and not one to trivialize. Moreover, the article is dishonest about the causes of the currency downturn. Just arguing that foreign economies have been more successful as of late and ignoring the increases in the money supply due to the lowering of the Federal Funds rate since last September is deliberately misleading. To suggest that policy makers don’t have influence over exchange rates whenever they control the money supply of our currency is just wrong.
I’m not going to argue about the issue with bureaucracy, but I still feel obliged to chide Bush for running on small government promises.
As to the wealth distribution “cliche”, I refer to the Pew Research Institute:
http://pewsocialtrends.org/pubs/706/middle-class-poll
I’ve done my research and I don’t believe I’m perpetuating a myth. This study actually discusses demographic changes that your article’s author can only make assumptions about. I feel confident in my source, but I’m more likely to trust a full study than one Economist’s WSJ column. Sorry.
Your last objection I don’t really understand. I mentioned ethanol producers as a component of the increased demand in my column, and I’m not sure why you believe they don’t get to count as a part of aggregate demand. The concept of demand for a resource like corn, includes everyone who wants to use corn… even if it’s not for consumption. If anything, what I wrote about ethanol could only be considered negative.
I didn’t dismiss you as an uninformed Democrat, I said you were repeating Democractic Party cliches, to wit: you seem to be opposed to tax cuts for the “wealthy.” It may very well be the case that tax cuts for the wealthy rob the middle class of its prosperity. My point here is not necessarily to argue against that, but to point out that it (along with your comments on Bush, and your insistence on the increasing inequality) is one of the slogans, or platforms, if you will, of the current Democratic Party.
You can count the Ethanol producers as part of the demand if you want, but their demand is subsidized by the government. The government, in other words, has distorted the market. Therefore I don’t think it’s fair to include them–in fact, the government should stop subsidizing them and let the market correct itself.
The Pew Research Center is certainly large, full of data, and impressive to look at. It may very well be the last word on the subject. Or, it may not.