Reaching Towards Recovery: What Should Be Expected

Although unemployment rates may remain high, Federal Reserve Chairman Ben Bernanke believes that the United States economy will begin to improve later on this year, assuming that financial sectors continue to 'heal'. Now more than ever, Bernanke appears to be fairly confident that our economy will soon reach its recovery. He predicts a "rebound in consumer spending, which is the driving force behind the economy". Bernanke also claims that we, "continue to expect economic activity to bottom out, then to turn up later this year". Even at the first sign of recovery, however, economic activity rates still won't be as high as they should be. This will keep inflation low for a while, resulting in lower interest rates as well. Bernanke announced that the Fed will soon be releasing further information about various lending programs in order to help release us from this credit crisis. Even though our current situation has become a serious issue and there are only a limited number of loans that banks can offer, Bernanke believes that things will only begin to get better from here.

-Hannah Rutzick

Animals are needy.

The Minnesota zoo announced an new raise in admissions prices by $2, due to a cut in its state funding. This would put them among the highest costing zoos in their category. This summer, prices for admission will rise to $16 for adults and $10 for children between Memorial Day and Labor Day, and will drop back to $13 and $7 in the off season. Family memberships will be increasing to $95. What a discount. The prices for many zoos in the nearby area are much lower. also, there are other options such as the science museum, complete with Imax experience. The problem with raising admissions is the current economic situation. Although input costs for the zoo will be increasing, there is a there is a threshold for prices. Currently, the issue will be whether or not demand will decrease due to high opportunity costs for the possible visitors. If this indeed happens, Minnesota very well could see its zoo closing, due to a downward spiral of customers, and an increasing price of admission.

-Adam

Piggy Pandemic

Let's face it, these past few days, the entire world has been frantically looking out for cases of the swine flu, also known as the "2009 H1N1". We can't help but to notice the increasing number of confirmed cases of the swine flu, which are spreading like wildfire across the globe. Just like any other respiratory virus, this worldwide pandemic is contracted by person-to-person contact. Health investigators from the World Health Organization (WHO) are working hard to keep things under control. A doctor from the WHO stated, "It really is all of humanity that is under threat during a pandemic". We just all have to be careful and make wise decisions regarding our health. Now you may be wondering, how does this situation relate to economics? It's a simple case of supply and demand. Schools and businesses are being shut down. Take into consideration the amount of antiviral drugs that need to be supplied to patients around the world. There is only a limited amount of supplies available right now, and the WHO is debating whether or not a vaccine made specifically for H1N1 is necessary or not. Medications are very costly, therefore creating a vaccine, which is in high demand right now, would cost our economy a lot of money. "There's no one action that's going to stop this. There's no silver bullet, but all of the efforts ... will help to reduce the impact on people's health."

-Hannah Rutzick

Un-Stimulate me, Please

Governor Sarah Palin (R-AK) announced her rejection of 45% of Alaska's portion of the stimulus package. In the short run, this bold move would reject $415 million aimed in multiple areas of life, such as $170 million for education, and several million focused on energy. With this in mind, she claimed that she does not want strings attached to her funds, and expand government, only to have deplete and have programs that become liabilities after the expiration of support. This is a valid objection, but it is a decision that could draw the treatment of economic policy along party lines. If this action holds, and is followed by other governors, much of the stimulus package could go to waste. This would result in an eventual increase in taxes for no apparent reason, causing people to feel less wealthy. End Consequence: a decrease in aggregate demand, leading to... more economic recession. In short: although the stimulus is a highly liberal solution to the economic crisis, opposing it could prove fatal, if not properly researched and planned out. Some conformity of opinion might be necessary for the current recession to be overcome.
-Adam

Pump Up The Profit: The Fed

The Fed's most recent attempt to help the economy has put banks in a tough situation. Their intention was to benefit mortgage volume, but consequently, loans are not as profitable as they used to be. On Wednesday, the central bank revealed their plan to purchase $300 billion in long-term debt. The outlook, however, does not appear to be a positive one. This situation causes problems for banks--banks that typically borrow money at short-term interest rates and issue long-term loans. Gerald Hanweck, a professor at George Mason University's School of Management says, "Normally banks do well when the yield curve is steep". This yield curve has presented the banks with a little bit of hope. The Fed's "aggressive rate-cutting campaign" is completely responsible for the acceleration of the current financial crisis. Hanweck continues saying that, "It could backfire a little on the Fed by weakening bank earnings which aren't that strong to begin with". The Fed's Treasury buying program has released very few details, but the Federal Reserve Bank of NY assures that the previous purchases are focused on improving the current situation.

-Hannah

Oil to respond to the Fed's newest economic plan

Amid America's economic woes, the oil industry is plotting its next move. The prices of many commodity goods are rising at an alarming rate. Commodity goods tend to increase in price when the dollar falls, or inflation goes up. With this trend in mind, prices will spiral upwards, and demand will plummet even further. So, OPEC had to meet and decide if they should cut the supply of oil, or let the market decide the demand. Their decision was to leave production unchanged. This could be beneficial for OPEC, because it would keep supply high, and in theory, increase the demand. But currently, demand is declining, and that will be the deciding factor for later action regarding OPEC. On a similar note, the cost of copper is increasing in a way parallel to oil. Since copper is linked to construction, it reflects the collapse of the housing market. With this in mind, oil and copper are two products to watch for the next quarter, in order to asses just how deep will the housing and transportation crises reach.
-Adam

Barrels and Bucks

In this image, employees on Wall Street are enraged that oil prices have increased to 'almost a hundred per barrel". However, in the following image, the cartoon alludes to the fact that since prices have risen, the cost of the barrel itself is almost a hundred, completely disregarding the cost of the oil itself. This cartoon gives a clear demonstration of how our economy has gotten out of hand. Prices on most product these days have gone way up, and it is becoming a major problem for us Americans. Hopefully, with a new president at hand, we will be able to get out of this recession and make a complete recovery.

-Hannah