Stimulus Package: One Year Later

Last year on February 17, 2009, President Obama signed the American Recovery and Reinvestment Act. The Acts three goals were to:

1) create new jobs
2) spur economic activity and long-term growth
3) end deficit spending and begin accountable government spending

The government is achieving this by spending $787 billion in:

1) tax cuts and benefits to working families and businesses ($288 billion)
2) increasing federal funds in health care and education ($224 billion)
3) federal contracts, grants and loans ($275 billion)

At the time the package was ridiculed. It was not a “politically easy decision”, according to President Obama, but it was necessary in order to keep the United States out of another Great Depression.

Now, a year later, the economy has gone from shrinking by 6.4% to growing at about 6%, 2 million jobs for Americans who would otherwise be unemployed, and awarded states with sums of money to help better their economies. For example, New York was awarded $12,478,500,000 and has so far received $2,000,760,000 and has seen 42,842 new jobs created. We can only continue to restore confidence in the economy and hope that it will continue improving.

The package’s goals are slowly being worked on: economic activity is being spurred (the economy is increasing by 6%), new jobs are being created in every state, and soon the government will start paying off its deficits.

The Fed.

On February 18, 2010, the Federal Reserve raised the discount rate (the interest rate for emergency loans for banks) from 0.5% to 0.75%. Some people panicked when they heard this because they thought this meant the Fed would raise other interests that would affect the average consumer. However, the Fed said that is not in their game plan. Some say raising the discount interest rate was a good sign because it means that economy is winding down somewhat and the US is recovering from the worst of the recession.


http://money.cnn.com/2010/02/19/markets/sunday_lookahead/

http://www.cnbc.com/id/35465481

How do the Olympics affect the global economy and morale?

Many think that hosting the Olympics is an automatic boost for the economy. Unfortunately, this is not always the case. Many economists say that the money it takes to prepare for the Olympics is such a large investment that it detracts from the money brought it from it. At least one positive result is that cities that host or bid on the Olympics almost always increase their national exports by 30% (The Atlantic).

Last year Vancouver’s economy declined by 1.8% in 2009. Different sources say different things about what the Olympics will do to Vancouver this year. The Conference Board of Canada says it is actually expected to boost their economy. ABC News, an American corporation, says that Olympic organizers are feeling the economic crunch. This is the first Olympics since the recession and the International Olympic Committee is even offering money to help cover to deficit, which they rarely do. There are protests being held in Vancouver because many people feel the money should be spent on the education system – and the protestors are threatening to interrupt the Opening Ceremonies.

This economic recession leads people to question the necessity and morality of holding the Olympics. The much-needed money being spent on the games could help with the economy (approximately 3-4 billion dollars, one third less than some years). But would not holding the Olympics depress and panic the world? How far should we go to save money (is what the question boils down to)?

Wake Up Call for the City that Never Sleeps

Mayor Bloomberg is facing many troubles with New York City’s economy.
According to Bloomberg’s testify before a state finance committee on January 25th and his preliminary budget on January 28th, his budget plan for 2011 might include:

-$4.9 billion deficit
-Cuts for every city agency (seventh time since 2007)
-Possibly closing:
*four NYC swimming pools
*a Manhattan centre for the homeless
*removing fire-alarm boxes from city streets to decrease number of hoax calls
*fire stations
-city funding for soup kitchens might have to go
-reduce in frequency of garbage collecting
-reduce in city payroll by 4,286
-let go of 19,000 city workers

NYC might experience a very similar hardship as it did in the 1970’s when fire stations were closed, garbage went uncollected, police officers were laid off, etc. In fact, the number of New Yorkers looking for work (425,000) is the largest it has been since the 1970’s.

Mayor Bloomberg seems to be New York’s biggest villain. Thousands of people will be out of jobs or receive pay cuts because of him. Shouldn’t he be trying to help New Yorkers, not hurt them? All his troubles should save the city about $1.6 billion over the next two years. But will cost lives to change. When the $1.6 billion that will be saved is compared to the looming $4.9 billion deficit that NYC will most likely have next year, do the consequences seem worth it? We’ll still have an unfathomable amount of money to pay off. What’s a little more?

However, we fell into this trap before. If we keep avoiding paying off our debts, the inevitable will (and did) happen. Our deficit keeps getting bigger! Every penny counts. The more we save, the closer we are to our goal. Of course, it’s hard to admit this when you are drowning in debts because you lost your job or have a decreased salary. But it’s true. The hardships America will face are necessary for us to get back to where we came from. The American people, whether they deserve it or not, have to face the consequences to climb back to the peak. I’m not saying we should take drastic measures to save every penny possible, but our lives are definitely going to have to change – if they haven’t already.


The Economist ,“Bloomberg’s budget(s) blues”, February 6th, 2010

Dollar is still on top

The United States Dollar is still the highest ranked currency in the world. This is comforting, but also questionable. However, there are facts to back it up. In 2007 the dollar was involved in 86% of the worlds exchange transactions. The euro, the dollar’s biggest rival, doesn’t even compete with this. China, Russia – the two countries that dump on the dollar the most – as well as most of the world, use the dollar in economic transactions between other countries. It will take a little while to switch out of this system now that it's been engrained for so long. America can know for sure that the dollar is still the most recognized, respected, and used currency around the world. At least for a little while longer.

Some superstitious people predict that in 2 – 5 years the dollar won’t be revered as it is now. If America continues with its trend of deficits and Obama and the rest of the American people can’t build up the economy, the dollar reign has a good chance of ending.

Last century the pound was in the position of the dollar. Next century it’s almost more likely than not that the dollar will not be in power. The question this really boils down to is how long can a regime last while still being effective and powerful? Everything has to end eventually.