National Data

So after posting the market data blog a few days ago I have been looking up more information that I thought some people might find just as interesting. It seems like it is rather hard to find all the big numbers for our nation on one site, so as a result you have to go to a few pages.

To find information on GDP, unemployment, inflation, and a few other economic indicators it turns out WSJ.com comes through again. In fact a link on the same page as the market data one I posted earlier will take you straight to the numbers. For conveinance sake, I will post a link to this as well on the right hand side of the blog for future use.

It turns out the national debt and budget are much are harder to find on one website and you have to do a fair amount of digging around. If you look under the U.S. Treasury website where they are supposed to post it, you will find the national debt under a link entitled MSPD, or monthly statements of public debt. You will then learn the national debt is currently at 9.1 trillion dollars and probably decide you do not really want to look that number up again. If you are so inclined, however, you can go here and choose which month to look over.

I would also like to use this post to point out for those readers who are unaware that The New York Times online paper is now totally free. There are no member only areas anymore and it is a very fast and easy way to get the news without finding a real paper.

Market Data

After writing my last post on the Fed I thought it might also be helpful to include some current market data for the economy. So included in my links section on the right side of the page is one called Market Data. This link leads to the Wall Street Journal’s market data center where you can easily look up several different and important current market indicators.

Some of the most important listed are the current DJ Industrials, S&P 500, Treasury Bills, futures for commodities such as oil, currency exchange rates, and of course the federal funds rate from my last post along with the prime rate. These are not even close to the only data listed on this page and I hope you will find some of it useful for decision making.

The Fed

I have recently been reading Alan Greenspan’s book The Age of Turbulence and I am pretty fascinated with the way the Fed works as a result (that and I am an econ major, hence me reading the book to begin with). With that in mind I have set out to better understand what it is the Fed does and how it does it.

The Fed is the central bank for the United States and is in charge of monetary policy with the main goal of controlling inflation. With that in mind they have used varying methods to try to stabilize the economy over the years. The most effective way of keeping inflation in check has been to control interests rates, since a lower interest rate means more spending and a higher one means less spending. More spending drives prices up and causes inflation to ensue.

The most important interest rate is the federal funds rate which is the rate that banks loan money to each other. The Fed sets a target federal funds rate and then tries to keep it there by performing what are called open market operations. These are when the Fed buys US Treasuries in order to alter the amount of money in the economy. When there is more money in the economy it is easier to access, which results in lower interest rates. When there is less money in the economy it is harder to get and this causes banks to raise their interest rates.

Knowing the federal funds rate is important to know for a number of reasons. First, it is an economic indicator and once you get the feel for it you can tell what the Fed believes the economy is doing. All businesses pay close attention to the Fed meetings to see if they will raise or lower the funds rate as an indicator of whether the economy is going into a recession or boom. Also, it is used as the base for many other important interest rates including the prime rate, which is the standard rate used by banks to make many loans and often the underlying rate used in variable rate credit cards.

Fighting Poverty and Spreading Awareness

A while back I mentioned that there are 2.7 billion people living on less than 2 dollars a day. That is almost unbelievable to most Americans and really puts the relative poverty, that we face in America, in perspective compared to the absolute poverty that nearly half the world faces. Since first reading about this and other health issues, I have become increasingly interested in the global fight to end poverty and preventable health issues that so many face.

After reading many articles and a few books on this subject I have found a few easy things that everyone can do as a normal American consumer to help the billions in poverty. Kiva.org, (Product)Red, and the ONE campaign are all things that can potentially make a huge difference.

Kiva.org is a group that allows anyone with a credit card to make personal loans from their own credit to others in poverty stricken countries all over the world. It is based on an idea called micro credit, which is the idea of giving small loans to entrepreneurs in developing countries that do not have access to collateral in order to establish their own business and raise themselves out of poverty. This is not charity, but simply a way of providing financing options to those who can not go to traditional banks. To learn more about the idea of micro credit you can read the book Banker To The Poor, by Muhammad Yunus who recently won the Nobel Peace Prize in 2006.

(Product)Red is a new kind of business platform that essentially provides a certain percentage of profits from consumer goods to the Global Fund to fight AIDS, TB, and malaria. Those happen to be the three most fatal diseases in the world, take millions of lives each year, and are easily preventable by prescription drugs that are not available to poor people. Many of these drugs cost under a dollar for each dose and for the people making under a dollar a day this is still too high. So far, Motorola, American Express, GAP, Armani, Converse, and Apple have all made Red products that you can buy, with some of them contributing up to 50 percent of the product purchased to the Global Fund. It has already raised over 35 million dollars since its inception in March of 2006.

The ONE campaign is mostly about awareness and advocacy for the fight against poverty. As of now it has 2.5 million members. You can get a white ONE wristband to wear and spread the awareness, as well as, signing the declaration on the website saying that you are committed to hold your government representatives responsible for legislation to promote the elimination of poverty from our world. Poverty is definitely a social construction and it can be made into a thing of the past if the world is willing to believe that everyone has a right to basic necessities such as food, water, shelter, and their health from infectious diseases.

Inflation

So I am not entirely sure how many people check to see that I am an Economics major in the About Me section, but that is what it turns out I am. So naturally my friend figured it would not be to hard for me to explain a few simple economic phenomena to her the other day, one of which was inflation. She basically asked why it exists and I stumbled around trying to explain it for a while and that made me a little frustrated with myself and I went straight home, pulled out my old Intro to Macroeconomics book and looked it up.

Inflation, according to my book, is a process in which the price level is rising and money is losing its value. Basically the price of things as a whole have gone up and your money is now worth less than its previously was in terms of your ability to purchase these goods. There are several ways for this to happen, the two most common of which are demand-pull inflation and cost-push inflation. Demand-pull inflation is where the demand for a good is suddenly higher and the price of it is then bid up by consumers. Cost-push inflation is where the cost of raw materials may rise and this in turn makes the end good more expensive. When the cost to make the good goes up, surprise surprise, so does the final product. These are the basic ways in which inflation can occur and by no means the only ones, its a rather complicated process it turns out and I feel a little better after refreshing my understanding as to why I could not explain it immediately.

However, how do we control inflation and why do we not try to make inflation zero, are two good questions that I also tried to answer. The answer to the first is that the Federal Reserve Bank is usually charged with controlling inflation by controlling the interest rates. If the Fed lowers the interest rates then people will be more willing to consume; if the Fed raises the interest rates people will be encouraged to save and discouraged from spending as the cost of loans goes up with higher interest rates. Knowing these are the two main ways in which inflation are controlled makes it a little easier to see why our inflation is normally kept to three or four percent instead of zero. If the Fed tries to curb inflation all the way to zero by raising interest rates, it is in effect cutting the spending habits of the people and the economy will slow and this can lead to recession. If the Fed lets interest rates become zero people will be glad to spend and borrow as much as they want and inflation will quickly rise at a pace that is quite harmful to the economy.

As you can see, by allowing some inflation to occur it is actually good for the economy because it promotes consumption, which is the basic building block of our economy. When people see that there is inflation in the economy they should not make the jump in reasoning to assume it is bad and that they can no longer afford things or that the government is not doing its job, but rather ask themselves how much inflation is occurring and whether or not it is a healthy amount.

The End of Poverty

I am currently reading a book by Jeffery Sachs, adviser to the United Nations and lead Developmental Economics Professor for Columbia, titled The End of Poverty. In this book he outlines the Millennium Development Goals aimed to eradicate extreme world poverty, which is classified as those living on less than one dollar a day.

He points out that nearly 1.1 billion people currently live at this level and 2.7 billion people currently live in what is considered moderate poverty, or less than two dollars a day. By these standards it is interesting to note that no one in the United States is even considered moderately poor. Looking at these numbers the next thing to notice that nearly 40 percent of humanity is currently living in poverty.

The Millennium Development Goals aim to halve the number of poor people living on a global stage. They are also aimed at a number of other topics including Hunger, Education, Gender Equality, Child Mortality, Maternal Health, AIDS, Environmental Sustainability, and developing a global partnership for development. To read more about the Millennium Development Goals you can look over this website or to understand Jeffery Sachs plan you can his book, The End of Poverty, yourself.