Government Shutdown

The Good and Bad of the Government Shutdown

Good:

–          The government is not paying for non-essential workers which is about 93% of the EPA and 95% of the Department of Education (Time Magazine).

–          It might force the politicians to come to a compromise and actually do something because it is a huge topic on the news.

–          The possible defunding of Obamacare.

Bad:

–          Government funded colleges like Navy get little funding and some of their classes are cancelled. And schools like the United States Merchant Marine Academy are shutdown.

–          Very little work in the government can be done until it is back up and running.

–          We see that our leaders can’t work together to do what is best for us.

–          The national forest reserves are closed!

Now What Are We Going to Do

There are more points to both of the groups above but the one thing that is clear is that our future is in the hands of childish politicians that are unwilling to compromise for the good of the people they work for. Politicians work for us and as the youth of the country we have the most to lose from their incompetency. This is our time to make a difference in the world because we are We have to do something in order to ensure that our future is as bright if not brighter than the generations before. We can do that by voting, being active in the government and not getting pushed around by those of higher “status.” We need to have our voices heard so that we do not get lost in the system that is politics.

obama meme

Although it is very funny, I would not be surprised something very similar to that actually happened. Our inefficient leaders are what prevent us, the youth of America, from achieving our full potential whether it be by high unemployment or superfluous regulations. Let us come together and decide our future and not let the perverse politicians decide it for us.

Fast Food Troubles

There has been arguments over what minimum wage should be and it is most prevalent in the fast food industry. McDonald’s employees were on strike in order for their wages to be increased to 15 dollars an hour. Therefore, we are going to discuss if the wages should be increased, possible affects if the wages are increased and how the recession has been a part of the payment problems.

The youtube video gets you up to date on what is going on.

http://www.youtube.com/watch?v=urXNLfegOds

 

If the wages were increased, that would be beneficial for MOST employees, but I would rather have many people working for an okay salary than having some people work for really good wages. I would like to say that raising the minimum wage would help all of the workers, but I just can’t do that because of economic principles. If the price of production, aka the employees, increases, the aggregate supply will decrease and that results in an increase in prices and less quantity of product being produced. (Look at the graph below for a reference.) So, if McDonald’s increases their wages they will either have to significantly decrease their profit margin and that would discourage them to open up more stores because of the cost and then less people will get jobs or they will increase the prices and people will not buy as many hamburgers and they might have to lay-off more employees. I would much rather prefer that everyone can buy a couple hamburgers for 2 dollars and many people having a job instead people buying one burger for 2 dollars and a few people with a job. Then I like what the guy at the end of the youtube video said, and that was that the people arguing for higher wages should be happy that they have a job in this volatile economy with a 14% real unemployment rate. So the lesson is, be happy with what you have and work hard to make more of it.

supply decreasing graph

 

http://econjournals.wordpress.com/2013/03/page/2/ Thank you for the graph!

 

Another youtube video that gets you thinking:

http://www.youtube.com/watch?v=Z0xVojIYA-o

 

That youtube clip makes a good point that employers hirer people and pay them high wages because of the experience and knowledge that they have. Then there are not a lot of younger people getting jobs because many of us don’t have a lot of experience and I hate to say it but we may not be worth the cost to the employer. The recession has decreased the number of jobs available so employers are really narrowing down their search for employees and that means that they are going to hire the older and more experienced workers. That explains why the average age of workers at McDonald’s is 29.5 years old.

 

Now that all of that is covered, let’s see if we can come up with some answers to these questions.

  1. Why are people rarely satisfied with what they have?
  2. What can be done in order to have college students and other young people be more likely to get a job?

Welcome to the first installment of Stay in the Loop! Thank you for reading, but I am going to jump right into it. You have might have heard about what the Federal Reserve is doing with quantitative easing (QE). But if you haven’t, here is how it goes: the Fed has been buying 85 billion dollars’ worth of mortgages and treasury bonds a month in order to jump start the economy. However, the economy has not started swiftly but is has been sluggish. So, I have done extensive research on this significant topic, and have applied my knowledge of economics and finance from school and working at UBS Financial Services to come up with a conclusion for why the economy is still sluggish.

 

The government has spent trillions of dollars on QE and it has had some effect but not very substantial. In my opinion, the economy is stagnant because there is too much involvement by the government. As it has been seen over the past few days with the Fed’s announcement of maintaining QE that what the government says actually has a significant impact on the economy. The numbers show that precisely after the Fed announced it was going to continue QE, the market went up .95% in response. But the market went dropped 1.45% over the next two days as the market settled back down to what it should be. That is precisely the reason why people are not spending the money that the Fed is creating. People are not involved in the market because they are too smart. They see that the market is too unpredictable as a result of government involvement. The government should focus less on how to fix the economy and start thinking about how to have us, the American people, trust the market and it. They should do that in order for us to begin spending and invest and doing things that create sustainable growth. Once that begins to occur, the real unemployment rate will be lower than 14% (check out graph #2) which everyone wants.

trust graph

 

http://www.theatlantic.com/business/archive/2010/04/80-percent-of-americans-dont-trust-the-government-heres-why/39148/ Thank you The Atlantic for the graph.

 

Enough said.

 

The over involvement by the government is hurting us because there is no stability in the market or in the dollar. It is only setting us up for a future of inflation and few jobs. This is a hard time for all college students – whether you are looking for an internship or a career – since the economic slump has drastically lowered the employment opportunities. That leads us to pay for more schooling in order to be smarter but mostly to have a fantastic resume. That extra schooling also brings along more student loans that cannot be paid off if there are no jobs available. For us and the US to have the brightest future, the government needs to step off and let businesses and consumers find some stability so that investment occurs and jobs open up.

unemployment graph 

http://catosdomain.com/?attachment_id=17166 Thank you floatingpath.com and Cato’s Domain for the graph.

 

I look at the real unemployment rate because of all of the underemployed and the people who have stopped looking for a job are included in the percentages.

 

Now that all of that is covered, it is time for some questions for all of you to ponder and hopefully comment on so that we can try and find the answers.

–          How will the government build our trust in the market and in it?

–          What are the possible results if we do not start trusting the market and the government keeps printing money?

–          How have you been affected by the recession?