The Student Word

I would like to invite everybody to this blog to discuss important macroeconomic events, monetary policy and of course macroeconomics as a whole. Every comment has a value, every thought has a right to exist.

Tuesday, May 31, 2011

My Thoughts about Mr.Bartlett's Article in the Times

I applaud and have a high regard for the research that Mr. Bartlett did in his last publication in the Times. He was able to break the myth about a weighty yoke the Americans bear on their shoulders. What he proclaimed could be combined into one verdict: There will be no tragedy if taxes are increased, but not now.

Are Taxes in the U.S. High or Low?


Read an interesting article published in the New York Times on May 31 by Bruce Bartlett. He has served as an economic adviser in the White House, the Treasury Department and Congress.

Monday, May 30, 2011

How much does the credit company charge?
In our world of globalization, where markets are connected together, we all use credit cards as the most convenient way of payment. But have you ever thought about the consequences of late, outstanding payments? Here is an example:
If a credit card company charges 1.2% a month on any outstanding balance, what is the annual percentage rate (APR)?
Many people make a big mistake just by multiplying 1.2% to 12 months. The answer 14.4% is incorrect.
Look how it works in a real life. The banks earn an immense amount of money, because of our irrational spending and inability to cover this spending on time.
Remember this equation:  APR = (1+Im)^12-1
A simply calculation shows us, that the answer will be: (1+0.012)^12-1 = 15.39%
The difference between the incorrect method and correct method is almost 1%. That's the way the economy works.
Advice: Use cash more often, or buy only those items you can easily pay for. Do not take an unbearable burden.

Sunday, May 29, 2011

The country's budget is at your hands!
You have a great chance to operate the America's deficit. Using the two strategies, tax increases or spending cuts, you can create the place you want to live. Make your own plan, and then share it online.

Saturday, May 28, 2011

10 The Most Important Principles of Economics
 Being a student of the Russian University of Economics, I started analyzing the huge role of economics in our world. You may work as a carpenter, plumber, or even be unemployed, but still experience the breath of its consequences every day. Here are the most amazing things that I, as a student, could hear from my professors and on TV almost every day:
1. Opportunity Costs (No easy ways. Actions require a price to pay);
2. Demand and Supply factors (Markets are usually the best way to allocate resources, if the wants meet each other);
3. Elasticity (Elasticity is a helper of the economy);
4. Nominal and Real GDP (The Positive Real GDP can become a close friend of yours);
5. Unemployment and its natural rate (High unemployment opens the door to sluggish recovery);
6. Inflation (A moderate inflation usually has two positive sides);
7. Monetary Policy ( Too much money never rescues the economy);
8. Fiscal Policy (Timely Stimulus Create Future Growth);
9. Wealth and Poverty (Income distribution helps only the rich layer);
10. Currency Wars ( All countries pursue their OWN interests).

I will start revealing these segments of economics in my following letters. Please wait.

Thursday, May 26, 2011

Is the Keynesian Approach still alive?

I came across an interesting video dedicated to the approach, that J.Keynes believed would be the most reasonable, to save the economy during deep recessions. Let's me first clarify you some of the principles, that Keynes based his faith upon:

1.Government intervention is necessary to stimulate growth and stability;
2.The reason why countries fall into recessions: low demand;
3.Stimulation should generally be approached through encouraging consumption;
4.Effective Demand plays a crucial role. Not enough to want something such as food or luxuries. One must have real assets or some products to sell in order to male that demand effective;
5.Effective Demand creates its own supply. The opposite to the Say's Law.

"The battle between the Keynesian team and the Classical team is not over" says somebody who is going to watch the video below. You are absolutely right. The more we see the uncharacteristic changes in the economy, the more we realize how far we are from knowing the complete truth about this struggling and hard-comprehending world.

Wednesday, May 25, 2011

Stagflation. It's back
by Larry Kudlow

Stagflation officially returned today with a nasty GDP report that showed only 1.8 percent real growth, but 3.8 percent for the consumer spending deflator. It’s a mini version of the 1970s: low growth, higher inflation.
Looked at another way, rising inflation is coexisting with high, near-9 percent unemployment. Keynesians argue this can’t happen. They believe strong growth and too many people working leads to high inflation. But they were blown out of the water way back in the ’70s. And their view is hitting another pothole right now.
Supply-siders know that inflation is a monetary problem. Growth is caused by low tax-rate incentives. And the combination of flat tax rates and sound money could produce strong growth with no inflation. Think 1980s and 1990s.But that’s not what we have now.

Tuesday, May 17, 2011

Dollar dominance to end by 2025: World Bank

"By 2025, the six emerging economies of Brazil, China, India, Indonesia, South Korea and Russia will account for more than half of all global growth, and the international monetary system will likely no longer be dominated by a single currency", said the World Bank on Tuesday.
 Emerging economies will grow on average by 4.7% a year between 2011 and 2025, while advanced economies are forecast to grow by 2.3% per year over the same period. "The most likely global currency scenario in 2025 will be a multi-currency one centered around the dollar, the euro, and the renminbi," said Mansoor Dailami, lead author of the report and manager of emerging trends at the World Bank, arguing China's size and the rapid globalization of its corporations and banks will likely mean a more important role for the renminbi.

People respond to incentives, if the government doesn't kill them by high taxes.
    

The United States of America has always been proud of its unwavering and startling economic position in the world, that the appetite to become even better has enthralled the nation from top to bottom. In many novels, America is described as a country of milk and honey, the land of prosperity, the place, where the manna from heaven has a prolific amount to feed the entire planet.
The last 10 years have bore out, to some degree, the inaccurateness of these words that literally praised the country to the skies. The US experiences one of the worst shocking periods in its history, and the charge for this lays not upon the mortal people, but on the irrational and insatiable desires from the side of the government.

Tuesday, May 3, 2011

Dimming Optimism for Today’s Youth

By CATHERINE RAMPELL, New York Times 
Maybe it has to do with sky-high levels of youth unemployment. Maybe it’s because student loan levels are climbing. Maybe it’s because today’s young will someday be stuck supporting so many of their elders.
Whatever the reason, for the first time on record, most Americans said they did not believe today’s young would have better lives than their parents, according to new survey data from Gallup. In an April poll, only 44 percent expressed that view.
Several polling organizations — including The New York Times — have been asking the question intermittently since 1983. The specific wording is: “In America, each generation has tried to have a better life than their parents, with a better living standard, better homes, a better education, and so on. How likely do you think it is that today’s youth will have a better life than their parents — very likely, somewhat likely, somewhat unlikely, or very unlikely?”
The measure peaked in December 2001 at 71 percent, shortly after the terrorist attacks.