Bartering System Sees Comeback

Summary

In times of hardship, many small businesses and store owners are now looking to alternatives to buying and selling goods.  It is difficult as of late to sell certain goods/services because people are heavily lacking financially.  So as a creative alternative to receiving all the required goods and services they need, many small business owners are now using a barter system in which they trade what they can offer to a person who needs it in return for them trading back something that the other person requires.  The barter system has always been around but has long lost prominence until now.

Connection

One of the core concepts discussed in chapter 7 is "The Barter System".  The "Barter System" is a system by which, had money not existed, would still happen between individuals.  It is quite similar to the exchange of money in that a good or service is traded off for something of value ( in today's case, money is perceived as having value).  However, the key difference is that instead of trading money, one may trade the other person something they have to offer in return for something they require.  Although the barter system can work in many cases, it is not an effective or "fair" system as there is no set value for anything and can cause disagreement.  In this case, however, it is effective even though the goods and services traded do not have a set value because the small business owners do not mind as they perceive it to be a fair trade since it is all basic day to day necessities. 

Reflection

I believe that although the barter system may at the moment seem very effective and smart, it may not be in the long run.  In the article, it states that the business owners are doing it as a way of saving money in times of hardship.  It is seen historically during the Great Depression that saving money during times of nationwide economic downfall causes much more problems than it solves.    By collecting the money and not spending it, it stops the flow of money which will eventually throw them into a deeper hole (if enough people do it).

link: http://www.myfoxatlanta.com/dpp/news/local_news/Bartering-Sees-Comeback-with-Businesses-20110511-am-sd

Questions

Questions to Answer:

1. How did the Great Depression start?

The "Great Depression" was the worst economic depression in US history.  It led to a decade known as the "Dirty Thirties".  One of the most major factors in this economic downfall was the way banks were run.  During the "Roaring 20s", as prosperity was blooming, the US's banks were lending out money at a fanatical rate - often to people who had no proof that they could repay their debts.  Later on in the decade, banks further worsened the situation when they decided to (for concern over their survival) stop issuing loans out to people due to the 1929 stock market crash of over $40 billion dollars. In an act of trying to save American companies, the US government created the Smoot-Hawley Tariff in 1930.  This new tariff only further worsened the economy as it made import prices incredibly high for other countries, who in turn also raised their tariffs.  

2. How did the current recession start?

The current recession, although not at the same level as the depression of the 1930's, is one that was caused by similar circumstances.  For the most part, the current recession was started because US banks were once again lending out money to people who did not show signs of reassured repayment - for example, people with bad credit.  This problem was worsened by the USA's real estate market crash because this particular market held a lot of money loaned from the banks themselves.  When the market crashed and house prices plummeted, people who had sub-prime loans were no longer able to repay their debts.

3. How did the government take part following the event? Were/ are they successful attempts?

During the 1930's depression, the US government tried to aid in the recovery of their situation by introducing work camps and new projects to create new jobs for millions of men.  They also helped the most famous depression by opening soup kitchens to feed those in need.  In this current recession, the government has offered help in the form of government bail outs to such major companies as G.M and Chrysler. Yes, I believe that these were successful attempts as by creating jobs and making sure major corporations do not fall, it allows millions to keep earning income, which in return gets put back into the economy.

4. What factors are present now that were not present during the Great Depression?

One factor that is present now but was not present during the Great Depression was high interest rate payments due to credit cards and the openness of information over the internet.  Today, credit cards are made widely available and are often promoted for usage.  Although this may not pose as an immediate problem for all, it does, however, pose as one for those who cannot control their spending and do not keep the high interest rates in mind.  For these people, the inability to repay banks their debts is worsened. 

5. How did these two affect United States’ GDP?

These affected the United States' GDP because during times of economic hardship, employment is severely cut down.  As a result of millions losing jobs, the rate of unemployment soars as the total amount of goods and services is cut down along with it.  Another factor that decreases GDP during these times due to unemployment is that because millions are without jobs, the money spent on consumer goods is further cut down as people have to resort to spending their savings.

6. Reflection: in your own words, tell me which one has made more of an impact on the world.

In my opinion, I believe that the "Great Depression" had a much harder impact on the world than the current recession.  Although the current recession has seen many challenges, the depression of 1930 has taught and made us open our eyes much more.  It has taught us things such as to whom we should make eligible for loans and the consequences of inadequate screening.   It has also taught us first what calibre of government intervention is required to save a failing economy. 

Aggregate Demand : Psychological

Article : http://www.vancouversun.com/technology/Gartner+Apple+will+remain+leader+tablet+boom/4594465/story.html

Summary:  

Mentioned in this article, is the new and sudden demand and interest in the "tablet race" between such companies are Apple, Samsung, and Research in Motion.  As the competition is steadily growing and becoming more and more competitive to capture more consumers, it is evident to see that companies are investing tons of money in developing new applications and technology to place themselves, at the very minimum, at par with Apple's iPad. Although at first glance, this sudden outburst of tablet madness may seem peculiar, it is notable that within 3 years of the iPad's release, expected sales have risen from $17.6 million to $108 million - a trend that seems to indicate demand is growing as more and more are sold.

Connection:  

I feel that this article strongly relates to the key concept of chapter 6 - aggregate demand.  In particular, it can be strongly connected to the "psychological" factor of aggregate demand.  In the psychological factor of aggregate demand, it is said that individuals may often find themselves being influenced to buy certain items as a sign of status ( in this case, money or style ) , or simply because the people around them have it so they too must have it.  This point can be proven further by the fact that, in the case of these tablets, the trend shows that as it's sale go up and up, so follows it's demand.  Psychological factors can also be once again seen playing a huge role in the "tablet madness" ensuing today as there are tons of people lining up to be first to take one home - although there are clearly no benefits of receiving it a few days before everyone else.

Reflection:

Personally, I feel that this obscure "need" for tablets is ridiculous.  There are tons of laptops that are around the same size as these tablets - with one exception: they can do a whole lot more.  Despite my personal input on the matter, I can understand why many people get a thrill through getting new gadgets, as I too at times find myself sucked into new fads in technology without knowing any particular reasons.  On the second thought, maybe the new found craze for iPads and Playbooks alike isnt such a bad thing - after all, it is creating jobs and shoving millions of dollars into our economy. 

Unemployment

Summary

                Despite Canada's late overall fall in unemployment rate, B.C's unemployment rate has suffered quite significantly in February 2011 as compared to December 2010.   This month, as more people have began once again to search for jobs, the unemployment rate has jumped from 7.6% to 8.2% ( or 9,100 positions ).  Elsewhere in Canada, the large amount of job gains in January (rise of 69,200 jobs) has made up for all the jobs lost during the recession.   Although the B.C Business Council advises that this month's report not to be taken in too deeply as a return to employment rate growth is expected in the next quarter, as of now there are evident declines in manufacturing, forestry, logging, and construction. In spite of employment in these industries declining, there is a steady improvement in the employment rate in the retail industry as shown by more and more retailers beginning to seek potential employees to hire.

Connection

                This article strongly relates to the concept of unemployment and the unemployment rate mentioned in chapter 5.  It is seen in this article that as more people once again began seeking employment, the percentage of unemployment followed and saw a rise.  According to the textbook, this is because unemployment is "any person, who during the reference week, was without work, had actively looked for work in the last four weeks, and was available for work."   In this sense, the rise in unemployment reported in this article may not have necessarily risen, but rather more of the unemployed people of Canada have once again begun seeking employment as many retailers and other small businesses have began hiring again.   Another connection that this article can make is the type of unemployment.  Due to the effects of the recession, many businesses had difficulty selling their products/services as money was more difficult for a lot of people to come by.  However, seeing as how many companies are once again back up on their feet making profits and hiring once again, it can be said that the type of unemployment that was dealt with in this article was "Demand Deficient Unemployment."

Reflection

                After reading this article and the textbook, I feel that the way the Labour Force Survey is conducted is not a very good indicator of unemployment rate in Canada.  By only counting those who are currently unemployed and looking for a job in the unemployment rate, this number can fluctuate as people begin to give up on seeking employment (due to very little opportunities) or when many companies begin hiring once again (as seen in the article).   In this sense, I feel that the rise from 7.6% unemployment to 8.2% unemployment reported in this article should, in fact - much like the B.C Business Council advised, should not be taken in too seriously as although the rate may be going up, a steady thousands of jobs are still being created/opened as the yearand condition of the economy progresses.

LINK: http://www.vancouversun.com/business/Canada+January+gains+almost+five+times+higher+than+expected/4223749/story.html?tab=PHOT

HST is not a progressive tax

Introduction

                The HST tax is a tax that before even being implemented, faced  82% of all British Columbians opposing it.  In this article, it states that although the HST is hated for the way it was brought in after it was promised not to be and also for being what it is - a tax, that is not the main reason for the levels of opposition that it faces.  The main reason why the HST is so strongly disliked by many is because it does not carry the characteristics of a progressive tax - but rather a regressive tax.  The article states that they believe the HST to be a regressive tax because the money collected from everyday average citizens ( who do not make nearly as much as the big corporations) does not return to them in the form of improved public education, healthcare, and social services - but rather goes straight to the rich corporations and businesses.  

Connection

                In chapter 4, one of the various topics that are discussed are progressive taxes and its opposite, regressive taxes.  In many countries today, the progressive tax system is used as it aids those who earn less income to make ends meet.  What a progressive tax is is a rate of taxation based upon one's spending amount and/or income/profit amount.  For example, if a low income citizen makes $20, 000 a year, he or she would only have to face a taxation rate of 15%, while a high income citizen who makes $200, 000 a year would have to pay a rate of tax of 30%.  On the opposite spectrum of progressive tax, there is the tax that the article accuses of being; a regressive tax.  Simply put, a regressive tax is a tax that makes the average/poorer citizens pay a higher tax rate proportionate to their income or makes many more items that the lower income citizens usually purchase taxable. 

Reflection

                In my opinion, I believe that the time right now is highly inappropriate for the introduction and implementation of the Harmonized Sales Tax.  At a time when economic stability is quite uncertain and thousands are in desperate need of full time jobs, I believe that it is wrong to shift the heavy burden of taxation from huge business corporation onto the everyday average Canadian struggling to make ends meet.  It is immensely incorrect to force more and more pressure against the lower income families in Canada in the form of a regressive tax - after all, how is it fair that at the end of day a multimillion dollar corporation pays less tax than a low income or average income family?

link: http://www.vancouversun.com/news/progressive/3834122/story.html