RS10 - Cyprus

The small country of Cyprus is in a great deal of trouble because they are financially unstable, and are going to drastic measures to bail their country out.  Instead of borrowing money from other countries governments they are trying to set a law where they can go into any Cyprus bank account and take a percentage of the persons savings. The people were outraged and immediately headed to the ATM's to withdraw all they money they could so it would not be taken from them.  The situation in Cyprus is a headline in the news, and it has been for a while.

Cyprus is only as big as as the Bronx in New York, but regardless of its size its become a banking island.  Its such a small island that they cannot afford to export items. So instead they have developed an offshore banking relationship to get their economy going.  They had to compete with other small islands by offering higher intrest rates and to turn the shoulder when it came to where the money was coming from and where it was going.  Thats true for most off shore banks to just turn your shoulder and not ask where the money is coming from or where it is going.

It just does not sit very well with me that saving account owners in Cyprus banks will have money taken from their accounts to dig the country out of trouble.  When people signed a contract to join the bank they were giving the benefit that if the money was ever not there to withdraw, then the government would pay you in full for the money you are owed.  But due to the country going into financial troubles the government has waived that insurance backing and will no longer pay the bank members back in full.  I just dont understand how that is fair, if I were to put my money into a savings account I would expect it to all be there whenever I would like to withdraw it.  If you really think about it though, when you put your money in an offshore bank, how can you have your full trust in the bank to not lose you money or have it spent or anything else that could happen to it.  I personally would never be putting my money in an off shore savings account because of what I am reading here. You cant trust the bank and what the government says because clearly here they went against their prior agreement.

RS9 - Dow Jones

As I listened to the Planet Money podcast about the Dow Jones, I thought to myself why would the Dow Jones even bother posting their numbers throughout the day with all the criticism they receive.  But then I began to realize that when you flip to the news station on the television or even a stock program or go online to look at the stocks and see how they are doing for the day.... the first one you see is Dow Jones. Why? The answer is because of the legacy is has.  Dow Jones has been there for over a hundred years and is known by pretty much anyone who has the slightest sense of what the stock market is about.  

So the past few days the Dow Jones has been on the rise and newscasters are making it look pretty important saying they are breaking all time highs. The Dow Jones uses a much different calculation system then the other major averages who are much more accurate due to the new algorithms they are using.  The system Dow Jones uses is old school and has stayed old school. Also the Dow Jones does not include major companies such as Apple, Facebook, or even Google.  If these three companies are tops in the market and Dow Jones does not account for them then how can you consider Dow Jones a reliable source.  The companies they use are all on the older side and dont show an economy that is becoming more tech savvy due to the younger generations. 

The S&P 500 is a much better average as it takes in five hundred companies rather then just thirty as the Dow Jones operates.  Think about it, what will give you a better feel for how the economy/stock market  is doing? Would it be Dow Jones who averages 30 big US companies, but not including some of the best, or S&P 500 which included tops of five hundred large scale companies.  If more people knew the facts about the Dow Jones, then more people would realize that it literally is useless.  Compared to other averages the Dow Jones is nothing, because it proves nothing.  And it is pretty pathetic that the Dow Jones company gets paid to give people the wrong perception. As Dow Jones goes on to say how positive its been the past few days. If you look at the S&P 500 it is below it's all-time highs in both nominal and inflation-adjusted terms.   So Planet Money has me convinced, Dow Jones is a non-factor when determining how well the stock market is doing.

RS8 - Unemployment

Planet Money did a podcast on the Unemployment rate and it was actually very interesting and also informative on how the unemployment rate has an effect on the stock market.  If you have money to invest you can make a killing by just knowing whether the unemployment numbers will be up or down compared to the last months numbers.  All it takes is for you to know the numbers before they are released and you are instantly rich because you have the inside scoop. 

The Planet Money team did some research through a visit to the The Bureau of Labor Statistics where they keep the records of the unemployment numbers.  This office of the government is a very secure place and even being inside the building you still are not allowed to know much and the employees are not allowed to reveal very much information.  Out of the four weeks in a month, guests are only allowed to be in the The Bureau of Labor Statistics only one week of the whole month.  Reason being that the Bureau is on lock down for the two weeks prior to the statistics being released.  Only certain employees have information about certain numbers, they are sworn to secrecy and not even their fellow employees are allowed to know the information that they are dealing with.  

Listening to the podcast, they described how several years back a economist was on the The Bureau of Labor Statistics website and found a link that was listed as new.  He then went and clicked on the link and brought him to what was the unemployment stats that were supposed to be listed the following day. Instead of taking this information and turning it into a personal profit he changed his analysis and posted it and within seconds was getting calls about it.  What he did was not illegal as it was a mistake by The Bureau of Labor Statistics.  So The Bureau of Labor Statistics had no other option, and had to release their information a day early.  So now they have many upon many security blankets so something like this will no occur again.

Personally if I was the economist who found that information I would have turned it into a personal gain. Through this podcast I learn that knowing this confidential information is pretty key into making financial gains.  It may be unethical but at the end of the day there would be nothing they could do because it is the fault of Bureau of Labor Statistics.

RS7 - CPI

Russ Special number seven was the Planet Money podcast titled "The Price of Lettuce in Brooklyn," they talked about how certain individual items sold at different stores and how they can affect the CPI levels in the economy. CPI stands for the Consumer Price Index, this system produces a monthly report on the prices urban customer pay on certain goods or services.  The CPI affects nearly every American due to the many ways it is used especially the three main things CPI affects.  CPI is used as an economic indicator and lets us know how well our economy is doing or even how bad it is doing.  CPI also is used as a deflator of other economic series.  And the third major thing CPI has affect on is the adjustment of the dollar value. Not only does the CPI take in the purchases in the market place but it also takes in the aspects such as governmental and environmental factors that affect human beings well being.

The people who have the job of going around to these different stores and inspecting the one hundred or so items that are specifically picked by this government agency go in and will find the price of the items and for the some they will also be weighed.  This way you can see the deflation.  In the podcast the planet money person went with one of the CPI analysts and they went to a grocery store and the product they had to look at was lettuce.  They got the price and then they got the weight of the bag.  The lettuce actually went down a significant amount in value. Almost thirty percent the lettuce dropped.  Then they went to the retail clothing outlet and looked for woman's dresses.  The owner of the store came over to the Planet Money lady and said he felt somewhat important because his products actually had some affect on the CPI.  If you think about it the price of one bag of apples or just one article of clothing can be part of an answer to how the economy is doing.  If the price is up then you can make the argument that the economy is struggling because companies need more money so they boost the prices.  Or if the company lowers prices they might be doing well so they can afford to lower the price to get more customers or the answer is actually the reversed answer, meaning the price is lower so they can bring in more customers and create more income then rather sitting at a higher price and not getting the customers because they dont have the money to afford a highly priced item.  

The CPI system is very complicated but very simple at the same time, that is why they have trained employes and a good system set in place allowing the people to do their job effectively. I find the CPI interesting in the way that it works because of the way that through just a few items you can tell how the economy is heading.

RS6 - Cliffhanger

As I listened to the Cliffhanger, the Frontline presentation of the fiscal cliff and the events that led up to it, I realized one thing.  Politics is a lot more about personal gain rather then making decisions that will be for the good of the people. A perfect example is the fiscal cliff, as the end of the fiscal cliff approached, December 31st, the Republicans and the Democrats could not come to an agreement to solve the situation.  If the fiscal cliff expired without a deal being made the United States would not be able to pay its bills, thus sending it potentially into a depression. 

In the video it explained how John Boehner was meeting with President Obama in secret behind closed doors trying to make a deal just between the two of them because in their eyes the deal had to be made. The secret meetings took place because Eric Cantor and Paul Ryan were coming out and saying how ridiculous President Obama was being due to the fact that he wanted to increase taxes while we are in a recession, they were attacking him because of the fact that he continues to want to spend more money then the United States actually has making it take out loans and having to borrow money.  But with the fiscal cliff approaching they had little to no time to make a deal so they could not wait much longer so the two met in private.  This just shows how self centered someone can be by potentially affecting millions over the fact that two parties cannot agree on certain topics.  It is all about wins and loses for the two parties and who can come out on top.  They are always trying to find flaws in the opposing parties arguments, instead of coming together and making a decision that will benefit everyone. 

I realize that dealing with someone with different views and opinions will be difficult, but at some point you have to come to realize that you just have to swallow your pride and come together as one to make things work between two opposite groups.  And if you look at congress, whichever democratic party has more members for the most part will run the house and make the decisions because they own the vote.  If you own the vote then you have the power to make changes to fit your party’s views and specifications.  When it comes down to big decisions you never can tell if it will be a confident correct decision because the vote will always be split.  You need to have congress be full of people who will vote either way and not side with one party over the other because some peoples vote is just made in order to suit their party and may not suit their personal opinion.  So all in all I believe that politics is more of a popularity contest then making decisions to benefit the people of the country.

RS5 - GDP

The term GDP is a term that most economists know very well, the three letters GDP stand for Gross Domestic Product.  The whole calculation in and out of itself is one giant mess and can cause a great controversy. Economist use GDP to determine how the economy is doing as well as to determine how happy a person might be due to a high GDP.  The difficult part about using GDP is that its a national average and does not speak for people individually because the equation becomes skewed and makes it seem like the economy is doing a lot better then it actually is.    

GDP calculates the United States total output and it breaks it down to sections, but one section that really stands out is defense spending.  The United States spends about 711 billion dollars on the countries defense department while China who is ranked number two is at 143 billion dollars in spending on defense department.  The United States spends almost five times more then China does. And the United States makes up forty percent of the worlds total spending on defense.  It is just hard to imagine why we need so much money to finance the defense of our country.  To me it seems overdone but this is a huge reason as to why our total GDP is so high.  If you lowered the spending on our countries defense we wouldn’t have such a high GDP. 

People argue that a high GDP will create happiness for the people, but how could this be true if we are spending 7% more on health care then western European countries while their life expectancies are all greater then the United States.  We also value our money a lot more then Europeans do as we work more hours then they do while they average 4-6 weeks of vacation. Europeans buy homes the same size as someone making more money over here in the United States because they don’t value their money as high as we do in the US. So you cant say the GDP proves how happy someone is because Europeans are just as happy with less money but equal assets.  So ultimately they have less funds. To me Gross Domestic Product can only be valued so much, but at a certain point, it becomes simply opinionated and as the article stated, “GDP per capita can cause a bar fight.”

RS4 - Would You Let a Coin Toss Decide Your Future?

While listening to the podcast from Freakonomics titled "Would You Let A Coin Toss Decide Your Future?" I began to think about what they were talking about in the beginning of the podcast when they were talking about a prior podcast they had that dealt with people quitting things that they have been doing for a long time but just are not sure about anymore.  They interviewed people and asked what they had quit, and there were some decisions you just do not understand.  The first one they mentioned was a man who was a professional car racer who decided to quit because it was not something for him.  Now that same guy uses a coin to make decisions in his life that dont have a lot banking on it.  For instance he uses a coin flip to decide which restaurant he would like to go to.  Another woman quit her job to become a escort. A very strange decision that she thinks fits her.  Life is honestly about how you personally feel and if you are not enjoying something then you can just step away and not think about it anymore because it is just not a factor in your life anymore.

Life comes with many choices and every choice you make will affect your future.  You may regret some decisions and you may love some decisions but in reality you cannot go back and change them because what is said is done and it is set in stone.  But im a firm believer in every decision you make will eventually pay off in some way.  Whether it is a small decision or a decision that is life altering, there will be some sort of good that comes out of it. But as the podcast focuses on the fact that life is all about decisions, some people have used their podcast and took it to their life and applied it.  It made people think, one man said he has quit everything he is bad at.  He told his kids to quit things that they were not good at.  

Freakonomics has created a webpage where you can go to with decisions of all kinds.  You go through a series of questions that you ask yourself and think about and if you still are not sure then you can actually flip a virtual coin that is 100% real in the aspect that it can land on either side and there is an option where you can do the best 2 out of 3 to determine things if you are just really on edge about. To me this is really cool and maybe its something i would consider using.  But only for decisions that are small and would not affect me either way the coin landed. But I feel as though this site could also be dangerous because what if someone had a serious question regarding life or death and they let a virtual coin flip make the decision for them.  So in some instance this site could be harmful.  As you go through life make sure the decisions you make are thought out and is made for all the right reasons.