Dow Hits Record High

U.S. stocks rallied, sending the Dow Jones Industrial Average to a record, as investors speculated the worst may be over for banks and construction companies hurt by subprime mortgage losses.

Lennar Corp. and D.R. Horton Inc., the two biggest U.S. homebuilders, advanced after Citigroup Inc. said the industry's 50 percent decline this year has made the stocks attractive. Citigroup led financial shares higher after the largest U.S. bank said it expects "a normal earnings environment" in the fourth quarter and former Federal Reserve Chairman Alan Greenspan said the credit slump may be ending.

The Dow's record caps a six-week recovery from a slump that helped wipe out almost $2 trillion in U.S. market value. The 30- stock gauge added 191.92, or 1.4 percent, to 14,087.55, above its previous closing high of 14,000.41 set on July 19. The Standard & Poor's 500 Index increased 20.29, or 1.3 percent, to 1,547.04, 0.4 percent shy of a record. The Nasdaq Composite Index gained 39.49, or 1.5 percent, to 2,740.99, the highest in six years.

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The worst is far from over.

Stupid Lawsuits: iPhone Edition

iPhone Buyers Sues Apple and AT&T

A New York woman is so angry at Apple Inc. for lopping $200 off the price of the iPhone that she's filed a lawsuit seeking $1 million in damages.

Dongmei Li of Queens, N.Y., claimed the company violated price discrimination laws when it slashed the price of the 8-gigabyte iPhone by a third, from $599 to $399, within two months of the gadget's June debut....

The lawsuit also named AT&T the exclusive carrier in the U.S. for the iPhone, and alleged that the two companies required two-year service contract for the iPhone constituted unfair business practices.

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You would hope this lawsuit gets tossed out of court.

She willingly bought it, prices dropped, now she wants money. Textbook example of why we need a loser pays system to stop frivolous lawsuits.

Recession on the way?

The Worst Recession in 25 Years?

On September 18 the Fed cut its target for the fed funds rate by 50 basis points (0.5 percentage points), from 5.25% to 4.75%. The move surprised many analysts who had been expecting a more modest cut of 25 basis points...

...Not only will it pave the way for much higher price inflation than Americans have seen in decades, but it will also exacerbate what could be the worst recession in twenty-five years...

From 2001–2004, the Fed kept (real) rates at the lowest they've been since the late 1970s. One of the consequences that has already manifested itself is the housing bubble. But a more severe liquidation seems unavoidable. The recent Fed cut may postpone the day of reckoning, but it will only make the adjustment that much harsher.

read the entire essay

Real GDP Graph

Free Textbooks

http://www.freeloadpress.com/

A quick registration process take less than 2 minutes. Currently not a lot of titles, but it is likely to grow. The books can be downloaded in pdf format chapter by chapter.

How Different Investments Did Last Week

WAR EAGLE!!!!!!

Students: Questions, Comments, and Suggestions

The benchmark is approaching. We have one more test before the benchmark. The benchmark will cover everything through supply. Don't wait to the last minute to cram for the exam. Start preparing now.

Hopefully the re-test will be much better. Use the book, ask questions, and pay attention in class. Those three things will help you tremendously. Doing your own homework at home (not in class AFTER it is due) will help you learn the material.

When we have the EOCT in May, it will be obvious who learned the material v. those who merely crammed and memorized the information for a single test. Work hard, study, learn, and pay attention in class.

Parents: Questions, Comments, and Suggestions

After an extremely poor results on the demand test. I have decided to issue books to the period classes. I had hoped the fill-in blank notes would be successful in getting the student to focus and pay attention in class and at the same time to move at a slightly faster pace in order to include the additional material that must be taught this semester based on the Georgia Performance Standards (GPS). The readings I provided apparently did not help students to gain a greater understanding of the material, I suspect largely to the fact that the reading handouts went unread.

We retested on demand today. Hopefully, the scores will be much improved. The issuing of books was generally well received. I hope they will be used. I think that most of the students now realize that economics is a subject that you must understand, not memorize. A lot of it is common sense, but many things also seem counter-intuitive until they learn to think like an economist.

There is no reason for panic. I think I now have their attention and I expect the test scores to have reached the low water mark. There is one test between now and the benchmark test (10%) given at midterm. We will be ready for it if they cooperate, work hard, and study.

The block class is performing very well. No problems at all. We are testing about every 4th day and the test result are among the best I have ever had. The students in that class like not having a book and enjoy the fill in the blank notes.

Bonus: Name the Members of OPEC

I will leave this post open for comments until sometime Sunday night.

Anna and Amber already have pre-emptively posted the answers to some other thread. Thanks for the eagerness.

UAW Strike Ends

The deal struck at 3:05 a.m. yesterday between General Motors Corp. and the United Auto Workers union marks the dawn of an uncertain new era for the American auto industry and its unionized work force.

For much of the last half century, Detroit's Big Three auto makers had collaborated with the UAW to create an industrial aristocracy of blue-collar workers whose pay and benefits set the standard for the American middle class. If the proposed contract announced yesterday is ratified by union members -- and is subsequently replicated at Ford Motor Co. and Chrysler LLC -- that era in American industrial history may be over.

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How to Tell When You Are Rich

When you buy a 16 million dollar estate complete with a main house and 5,000-square-foot guest house... to tear it down and built a new house.

read the story

UAW Go on Strike Against GM

The United Auto Workers union launched a nationwide strike against General Motors on Monday as 73,000 UAW members walked off the job and hit the picket lines at the nation's largest automaker.

full article

Economics Contest (APEE)

The Benefits of a Free Market Economy

First Prize: $2,500
Second Prize: $2,000
Third Prize: $1,500
Honorable Mentions: $250

Contestants will choose from the following three topics:
What Causes Prosperity?
What is the Role of Ethical Behavior in a Free Market?
Can Free Markets Protect the Environment?

Deadline: December 1, 2007

Winners announced February 15, 2008

more info

Give it a try you might win.

How Different Investments Did Last Week

"Helicopter Ben" Bernanke

In monetary economics, a liquidity trap occurs when the economy is stagnant, the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. This makes the recession even more severe.

In normal times, the monetary authority (usually a central bank or finance ministry) can stimulate the economy by lowering interest rate targets or increasing the monetary base. Either action should increase borrowing and lending, consumption, and fixed investment. When the relevant interest rate is already at or near zero, the monetary authority cannot lower it to stimulate the economy. The monetary authority can increase the overall quantity of money available to the economy, but traditional monetary policy tools do not inject new money directly into the economy. Rather, the new liquidity created must be injected into the real economy by way of financial intermediaries such as banks. In a liquidity trap environment, banks are unwilling to lend, so the central bank's newly-created liquidity is trapped behind unwilling lenders.

Milton Friedman suggested that a monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is referred to as a money gift or as helicopter money (this latter phrase is meant to call forth the image of a central banker hovering in a helicopter, dropping suitcases full of money to individuals). Political considerations make it difficult for a monetary authority to grant the money gift, because individuals and firms not receiving free money will exert political pressure. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away. During the Great Depression in the United States, the Federal Reserve offered to buy any gold at a price well above current market prices. This was essentially a money gift to gold holders.

full article

Students: Questions, Comments, and Suggestions

A little more maturity...

Parents: Questions, Comments, and Suggestions

Things are progressing...

Will the Dollar Collaspe?

read one opinion

Debt Ceiling: $8.965 trillion

"Treasury Secretary Henry Paulson told Congress on Wednesday the government will hit the current debt ceiling on Oct. 1.

He sought quick action to increase the limit, saying it was essential to protect the "full faith and credit" of the country, especially at a time of financial market turmoil.

The limit is $8.965 trillion. Unless Congress votes to raise it, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due."

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