Charles Edison

"Economics, politics, and personalities are often inseparable." - Charles Edison

Wednesday, February 23, 2011

Retirement Expectancies May Hurt Unemployment

This article says that most people plan to retire when they're 70 or older instead of 65. Some even speak of waiting until they're 80 to enjoy their golden years. People simply can't afford to stop working any earlier than that, especially since most don't expect to get anything from Social Security. But those people staying in the work force longer could have a negative effect on unemployment. It would reduce frictional unemployment (voluntary unemployment), and that may seem like a good thing on the surface. But frictional employment is natural and will always be present to some degree, so it's not a big deal if we have it. The problem is that if people wait longer to retire, they make it harder for others to get jobs. In recessions and troughs, the younger and more inexperienced are going to be layed off first unless they're needed. If the more experienced potential retirees hold on to their jobs, the younger people (who may have to provide for a family) won't be needed and will have a harder time finding work. That will increase the cyclical unemployment, which is the type of unemployment we want to minimize the most. But if Social Security is going to run out soon, the older people don't have much of a choice.

Wednesday, February 16, 2011

Time to Repay the Home Tax Credit

In 2008, first-time home buyers were eligible to receive a tax-credit. The government referred to it as something similar to an interest free loan. Americans could take advantage of this on the condition that starting about now, they would pay back the loan over a 15 year period (if they took the maximum amount of $7,500). When the government gave out these loans, it was 'creating' money and injecting it into the economy. This increased the money supply and expanded the circular flow. Now the government wants their money back. Since households are paying these loans back in taxes, money is being leaked from the economy and the circular flow will shrink.  If people have to pay more a year in taxes, they may have to cut spending in other areas of their lives. If spending drives the economy, this won't bode well for trying to propel the economy up into a recovery period.

Click here to read the article that discusses paying back the credit.

Tuesday, February 15, 2011

Obamas Budget

With the recent release of Obama's budget for the next couple years the government has been restless. The Republicans are already saying that the budget isn't serious. Saying that the Budget wouldn't really decrease the rising debt that our country is acquiring. If we don't stop the increasing debt to our country our economy will plummet back into a recession. This would also be known as a double dip recession. This would happen if the budget didn't work because the value of the american dollar would go down. This would create inflation to compensate for the decrease in value of the dollar. This would create major issues for the world in whole if we didn't fix the debt of our country. To fix the debt we have created we would have to decrease government spending which would have a negative and positive affect on the economy. But we would also have to increase taxes which every american who pays taxes would disagree with this proposal. That is why the President comes up with a Budget plan to limit and decrease government spending over a set period of time.

Friday, February 11, 2011

Chrysler Super Bowl Ad

Although we did touch on the Chrysler Super bowl ad I4u confirms it as the most expensive. The question we did not cover is why Chrysler chose to spend so much on an ad of that length rather than the usual 30 seconds. I do believe the reason why they chose to do an ad of that length was to transform the commercial to almost a short film. In this super long commercial there were three different points of focus, first being the city of Detroit. If I live in Detroit after seeing this commercial I am definitely more likely to by a Chrysler versus say a Hyundai. The commercial also featured an artist who topped all album sales last year. The fact that Eminem was top in album, which means he has a very wide range of fans, sales confirms that the commercial was not at all solely aimed at the lower class. But to everyone who supports American economy, or has an Eminem song on their iPod.

Thursday, February 10, 2011

Are Low Prices On Older Products Beneficial for Everyone?

A report in Yahoo! Finance discusses the prediction that several high-tech items will be cheaper in 2011. Different products have different reasons for lowering their prices. For example, the current versions of the Kindle and Wii are expected to be cheaper because newer versions are coming out this year. A lot of people don't consider the fact that they can still buy the older version of a product after the newer version comes out. Articles like this one may turn people to the fact that this is possible. My initial reaction would be that the companies selling these electronics would be upset about this because they may not have as many consumers wanting to buy their new product. But then I considered the fact that consumers are still buying what the producers are selling, even if it's cheaper. Companies don't want to lose out on the money they've made producing the older versions, so people taking advantage of these deals isn't bad news for them. Plus if people rush to buy the older versions when they become cheaper, they may become sold out or very scarce. This forces others to buy the newer version, so the company gets a win-win.

Tuesday, February 8, 2011

iPhone 5

With a little redesigning of the iPhone 4 for there newly contracted service, Verizon, iSupply also leaked new information on the iPhone 5. The leak of information on the iPhone 5 will affect Apples supply and demand on there iPhone 4 product. This will affect the iPhone 4 product because people will want to wait for the new iPhone 5. Thus creating less demand for the iPhone 4 but the demand for the iPhone 5 will increase. This would take into affect the supply of the iPhone 4 that is distributed to the service companies. This would create, for an amount of time, a decrease in the amount of profit generated by the iPhone 4 alone. But since the iPhone 5 has been leaked and is sure to come out, the value of the iPhone 4 will go down. This is because the iPhone 4 will become out dated and replaced by a newer product. In the long run the iPhone 5 will generate a better profit for the company. It will also cause for a bigger demand for the iPhone 5 due to the iPhones credibility that it has earned over its many generations.

Wednesday, February 2, 2011

Amazon Encroaches On Netflix

As discussed in this article, Amazon is going to start streaming movies and TV shows online to its customers. This is great for Amazon since more and more people want to watch television online now, but it's not so good news for Netflix. Netflix has done a great job building itself up with online streaming of movies, home delivery, and no late fees. Most importantly, it beat out its biggest competitor: Blockbuster. Netfilix had a very strong hold on online streaming, but Amazon coming in could change all of that. It would be really convenient for consumers to get their books and movies all in one place. That would give consumers a good substitution for Netflix, especially if Amazon is cheaper. Substitutions equal a decrease in quantity demanded for Netflix, which equals a decrease in profit. Since Netflix has a larger selection and an HD option, I don't think Netflix will be in major trouble. But as Amazon develops their new idea, Netfilx will have to find something to stay in the game.