Current Events:
The Goodguide has cautioned consumers about the ubiqutous Christmas sensation, the Zhu Zhu Pets, furry robotic hamsters, which are the hottest Christmas craze of 2009-–with millions being flown into the U.S. from China. While Zhu Zhu pets have not faced a Consumer Product Safety Commission recall, a report from GoodGuide.com says they contain antimony, a toxic metal known as a carcinogen. The federal limt for antimony in products is 60 parts per million, while the Zhu Zhu has 93 parts per million in the fur and 103 in the nose. "If ingested in high enough levels, antimony can lead to cancer, reproductive health and other human health hazards," said Dara O'Rourke, an associate professor of environmental science at U.C.-Berkeley and co-founder of GoodGuide.com. "If these toys aren't even meeting the legal standards in the U.S., then I would say that it isn't worth the risk for me to bring it into my household."
Sources in Washington say a recall of the toys is unlikely because of the sheer volume already sold – millions throughout the U.S.
But that's not the case with dozens of other products imported from China just in time for Christmas. Of the 28 products recalled by the Consumer Product Safety Commission so far in November and December, 16 were manufactured in China.
But it's not just children's toys from China that are getting recalled and posing safety hazards. Kids' clothing has also been a target of the CPSC this holiday season. Various kinds of hooded sweatshirts have been targeted as strangulation hazards because of unsafe drawstrings. Some of these items are sold in upper-end department stores like Macy's and Dillards – not just Walmart.
Only one major recall this season was highly publicized. That was Maclaren USA's voluntary action to pull from stores baby strollers that resulted in at least 12 finger amputations. About 1 million of them were in circulation – manufactured, of course, in China. They sold for between $100 and $350.
Thinking about giving someone a kitchen appliance this year? Be warned.
Haier America Trading of New York, N.Y., voluntarily recalled nearly 54,000 blenders made in China when it was learned the blade assemblies came apart or broke, posing laceration risks.
Or maybe you were thinking about getting Dad a gas grill. About 663,000 Perfect Flame grills made in China and sold in Lowe's were voluntarily recalled because they posed burn hazards to users. They caused at least 40 fires resulting in burns to hands, arms and faces and at least one eye injury requiring surgery.
Power adapters used with IBM back-up disk hard drives, also made in China, were recalled when it was found they were failing and exposing live electrical contacts that posed shock hazards to consumers.
Maybe you thought a travel mug made in China was a safe gift. Think again. About 15,000 had to be recalled by the "Life Is Good" company when it was found they posed burn hazards.
And before you get that new baby a pacifier for the stocking this Christmas, be sure to check it out. Some 641,000 "Bobby Chupete" pacifiers had to be recalled this season because they pose a choking hazard.
Not even that Christmas tree stand is necessarily safe. About 13,000 manufactured in China had to be recalled after causing users to fall and sustain serious injuries.
Previously frozen catfish from China was found to have been laced with banned antibiotics and scallops and sardines coated with bacteria.
Chinese toothpaste also has been found by the U.S. Food and Drug Administration to have contained a deadly chemical used in antifreeze. In one case, four defendants pleaded guilty to importing from China more than a half million tubes of toothpaste falsely labeled as the popular brand Colgate that contained the toxic antifreeze ingredient.
According to a U.S. Department of Justice statement, the defendants were responsible for 518,028 tubes of toothpaste worth an estimated $730,419 that were shipped into the country and distributed to bargain retail stores in several states.
Chinese imports have been blamed for poisoning America's pets, risking America's human food supply and reintroducing lead poisoning to America's children.
For years, Washington has claimed to be working on the problem of defective consumer products being delivered from China to the United States.
The Test Analysis, as announced on Twitter, has been published. Once the Make-Ups are not holding the class up we can review the material. The Calendar, as announced on Twitter, notes that the Make-Up Test is on Friday and the Ch. 6 True/False Quiz is on Friday also.
We will pick up where we left off: Ch. 15, Introduction to Macroeconomics, PowerPoint presentation and Handout Ch. 15 questions.
Chapter Overview
As an introduction to macroeconomics, this chapter begins with an overview of
macroeconomics, discussing its origins and presenting material on the business
cycle. The National Income and Product Accounts are then covered, as well as the
two approaches to measuring GDP and the connection between GDP and the standard
of living. The chapter concludes with a section on the work of Joseph
Schumpeter and creative destruction.
Chapter Outline
The Scope of Macroeconomics
Major Events that Shaped Macroeconomic Ideas
The Great Depression
Episodes of Hyperinflation
Budget Deficits
Macroeconomic Goals
Inflation
Unemployment
Types of Unemployment
There are several different types of unemployment, of varying duration and severity (in terms of implications for the economy). This video goes through the types, and addresses why the Macroeconomic goal is "Low Unemployment," rather than "Zero Unemployment."
Just for background, you can consider a show entitled, "Fault Lines on Unemployment," from al-Jazeera.
Business Cycles
Business Cycle: short, best introduction to Macro Business Cycle explanation. "mjmfoodie" produces helpful economic videos.
Business Cycle
Just for historical background, consider the history of business cycles.
Outlining briefly the people and discoveries relating to economic cycles. Beginning with Sir William Herschel who around 1800 found a connection between the Sunspot cycle and wheat prices, mention is made of Clement Juglar 1860s, William Stanley Jevons 1870s, The Rothschild family 1890s and Rockerfeller family, W D Gann 1900s, Joseph Kitchin 1920, Kondratief (who I accidentally left out of this video) and his 54 year cycle in the 1920s, Alexander Chizhevsky and Raymond Wheeler around the 1930s being interisciplinary cycles researchers, R N Elliott, Joseph Schumpeter and Simon Kuznets (later to receive a Nobel Prize) and the formation of the Foundation for the Study of Cycles by Edward R Dewey and others in 1942. The age of computers arrived in cycles research with J M Hurst about 1970.
For more information about cycles research:
http://www.cyclesresearchinstitute.org/
http://foundationforthestudyofcycles....
http://ray.tomes.biz/
There is an interdisciplinary cycles discussion forum open to all people to search and read, and people can join to participate, at http://tech.groups.yahoo.com/group/cy...
For more on the history of economic cycles:
http://www.datacomm.ch/dbesomi/Links/...
http://www.timesizing.com/1kondrat.htm
Defining Business Cycles
Dating Business Cycles
Is the New Economy Producing Micro Recessions?
Checkpoint: The Scope of Macroeconomics
National Income Accounting
The Core of NIPA
The Circular Flow Diagram
Circular Flow Diagram and Micro vs. Macro
This video gives an overview of the circular flow of economic markets and discusses the difference between microeconomics and macroeconomics.
For more information and a complete set of microeconomics videos, see
http://www.economistsdoitwithmodels.com
Spending and Income: Looking at GDP in Two Ways
Gross Domestic Product
Real GDP
The difference between GDP (Gross Domestic Product) and GNP (Gross National Product)
Dr. Richard Ebeling, Clemson capitalism, answers a student question about GDP and its usefulness as a measure of economic health.
How To Calculate GDP
Cf. http://www.informedtrades.com/ A lesson on what traders of the stock, futures, and forex markets look for when the Gross Domestic Product (GDP) Number is released. As we have learned in previous...
http://www.informedtrades.com/
A lesson on what traders of the stock, futures, and forex markets look for when the Gross Domestic Product (GDP) Number is released.
There are many components of the US Economy which can affect overall economic growth and inflation expectations. Some of the major examples here are how many people are employed in the economy vs. unemployed, how much the housing market is growing in different parts of the country, and at what rate the prices for different products in the economy are seeing increases.
As all of these things are so important to the economy and therefore to the markets, there are no shortage of economic reports which are released to try and help people gauge how things are going with different pieces of the economy. It is important for us as traders to understand the major reports here as even if we are trading off of technicals, understanding what is happening in the market from a fundamental standpoint can help establish a longer term bias for trading. In the short term an understanding of these numbers will also help to assess the erratic and sometimes extreme movements which can occur after economic releases.
The granddaddy of all economic reports is the release of the Gross Domestic Product (GDP) number for the economy. The Gross Domestic Product for the US or any other country is the final value of all the goods and services produced in that economy. Essentially what you get after calculating GDP by adding up the value of all goods and services produced in the economy is a measure of the size of the overall economy. It is for this reason that market participants will watch the GDP number closely as the rate of growth in this number represents the rate of growth in the overall economy.
As a side note here, GDP also allows a comparison to be made of the sizes of different economies from around the world, as well as their growth rates. To give you an idea of just how large the US Economy is, 2007 GDP for the United States was estimated at 13.7 Trillion dollars. This is in comparison to the next largest economy in the world, Japan which has a GDP of under 5 Trillion Dollars.
Quarterly estimates of GDP are released each month with Advance Estimates which are incomplete and subject to further revision being released near the end of the first month after the end of the quarter being reported. In the second month after the end of the quarter being reported preliminary numbers (which basically means more accurate than advanced) normally are released and then finally the final GDP number is released at the end of the 3rd month after the end of the quarter being reported on.
Traders are going to focus heavily on the growth rate released in the Advanced number and markets will also move on any significant revisions made in the preliminary and final GDP numbers.
The Expenditures Approach to Calculating GDP
Personal Consumption Expenditures
Gross Private Domestic Investment
Government Purchases
Net Exports of Goods and Services
Summing Aggregate Expenditures
The Income Approach to Calculating GDP
Compensation of Employees
Proprietor’s Income
Rental Income
Corporate Profits
Net Interest
Taxes, Foreign Income, and Miscellaneous Adjustments
National Income
From National Income to GDP
Net Domestic Product
Personal Income and Disposable Personal Income
GDP and Our Standard of Living
Checkpoint: National Income Accounting
Technology and Schumpeter’s Creative Destruction
■ Show actual data on GDP in different countries by taking a look at the CIA World
Factbook information for different countries. The Web site is located at https://
www.cia.gov/library/publications/the-world-factbook/index.html.
Chapter Checkpoints
The Scope of Macroeconomics
Question: Do you think the business cycle has a bigger impact on automobile and
capital goods manufacturers or grocery stores? Why or why not?
National Income Accounting
Question: People have individual senses of how the macroeconomy is doing. Is it a
mistake to extrapolate from one’s own experience what may be happening in the
aggregate? How might individual experiences lead one astray in thinking about the
macroeconomy? How might it help?
Extended Examples in the Chapter
Is the New Economy Producing Micro Recessions?
The “new economy” is a term coined in the 1990s and is generally used to denote
the changes in the economy that have resulted from globalization and information
technology. The reference for this section is a New York Times article by David
Leonhardt, titled “Have Recessions Absolutely, Positively Become Less Painful?”
(October 8, 2005, p. C1). For more background you may also wish to see the 1997
article by Stephen B. Shepard (then editor-in-chief) in Business Week titled “The
New Economy: What It Really Means,” available on the Web at http://www.
businessweek.com/1997/46/b3553084.htm.
Technology and Schumpeter’s Creative Destruction
Were computer technology and the Internet a Schumpeter innovation wave or not?
Schumpeter focused on the power of major innovations to form waves of growth
throughout the macroeconomy. So the real question is whether or not the change in
technology affected most parts of the economy in a very significant way (some definitions of creative destruction use the term “transformation” in its description).
The background information provided by Wikipedia also relates creative destruction
to layoffs (see http://en.wikipedia.org/wiki/Creative_destruction).
Examples Used in the End-of-Chapter Questions
Questions 3 and 6 reference the National Income and Product Accounts (NIPA).
Visit the Web site at http://www.bea.gov/National/Index.htm to view the latest press release on GDP. Links to other data are also available.
For Further Analysis
How Can You Tell if It’s a Recession?
The example in the student handout will be used as a small group exercise. It is designed to complement the text’s material on the business cycle and also to provide a lead-in to the measurements of inflation and employment that will be covered in the next chapter. It requires students to find and begin to assess actual data on the economy.
Web-Based Exercise
This example below can be used as an individual or small group research project. It requires students to evaluate “well-being” in terms of GDP and other criteria.
Can GDP Buy You Happiness?
About 35 years ago, the king of Bhutan decided that the well-being of his country
was not best measured by its GDP, but rather by something he called its “Gross
National Happiness.”
1) Learn more about GHI and compare it to GDP.
2) Assess both as measures of “well-being.” To do so, define your own criteria
for well-being. You may agree or disagree with what is included in these
measures and add your own indicators if you wish. In all cases provide a
rationale for your choices.
A very useful source is the article by Andrew C. Revkin in The New York
Times (October 4, 2005) titled “A New Measure of Well-Being from a Happy
Little Kingdom,” available on the Web at: http://www.nytimes.com/2005/10/
04/science/04happ.html?ei=5088&en=a4c0250cf8730dca&ex=
1286078400&partner=rssnyt&emc=rss&pagewanted=all
How Can You Tell if It’s a Recession?
Visit the Web site of the National Bureau of Economic Research (NBER) (http://www.nber.org/) to
answer the following:
1) Does the NBER define a recession as two successive quarters in which there is negative growth in GDP? Why or why not?
2) What problem does the NBER face in using data from the Bureau of Economic Analysis of the U.S. Department of Commerce?
3) Besides GDP, what other important economic data does the NBER review for its reports?
Email HW to gmsmith@shanahan.org.
1. Answer the two Checkpoint questions and check your answers on p. 425.
