Current Events: German Elections

As of September 28, 2009 Germany elected their chancellor to be Angela Merkel. This would be Merkel’s second term in the position and she remains a popular political figure despite the economic downfall endured by Germany as well as other countries in Europe and around the world. This election also leaves a mark on history as the SPD party has its lowest percentage of representation in the German Diet since World War II. Also with a coalition to be formed between the CDU/CSU (Merkel’s party) and the FDP, Merkel will have a very high representation in the legislature.

Merkel’s biggest priority during this term is helping the German Economy by protecting and creating jobs for the German people. This is a major concern for German citizens as earlier this year unemployment was listed at about 5.2 million. With Merkel’s now primary focus on this economic issue, hopefully the unemployment will decrease for the largest member of the European Union. If this is so, maybe Germany could lead the way for its fellow countries as it puts forth effort towards this concern. Perhaps of the three government powers over the economy, supply-side and fiscal policies would be most effective. Through both policies the economy should regain some growth. Also through supply-side policies the qualifications of the German labor force should improve and through fiscal policy perhaps government spending will also be put forward to serve this problem. Hopefully, under this new government term changes will come to help the German economy.

Sources: http://news.bbc.co.uk/2/hi/europe/8277912.stm;     http://news.bbc.co.uk/2/hi/europe/8277526.stm;  http://news.bbc.co.uk/2/hi/4572387.stm;     http://news.bbc.co.uk/2/hi/business/4248034.stm

two benefits of international trade

Explain two benefits (gains), which may arise from international trade.

With international trade, benefits, or gains,      likely arise for both countries involved. Two  examples of such benefits are more availability  and more diversity of products in a country, as  well as, the improvement and development of  products.

The availability and diversity of a country’s  products would increase in an economy through  international trade, because trade would allow  foreign products and services to appear on the  economy’s market alongside domestic goods  and services. This expands the consumer’s  choice as it enables access to goods and services not provided or available within their domestic economy. This benefit also helps a country if they have less resources in a certain area; such as natural resources like coal and oil. International trade enables countries to access these sort of unavailable or scarce goods. An example of this could be the attempt to bring clean water and technology which serves to purify the water to Africa. This is something of a struggle as Africa’s natural water is often unhealthy, therefore, through this service consumers will have more access to water and this may likely lead to developments in the water cleansing technology, as well as, possibly benefit the economy.

International trade is also beneficial as it creates global competition resulting in the improvement and development of products. With these improvements there is the result of growth and development in the world economy as well. An example of this might be within the car industry. Due to global competition from international trade, in the U.S. particularly, the U.S. car industry is suffering, while the Japanese industry  is going steady. This is due mostly to consumers consumption and their preferences. The competition on this market led to more improvements and developments for Japanese styled cars that appeal stronger to the American consumer than those developments of American cars. Despite this sad toned set back in the U.S. car industry, the competition and international trade with Japan continues to lead to advancements in this industry, progressing the market and economy.

Lehman Brothers Bankruptcy 9/15/08

On September 15, 2008, the Lehman Brothers investment bank filed for bankruptcy, resulting in the loss of many jobs and threatening future bankruptcies in other large U.S. businesses, such as A.I.G.  Prior to this announcement the company did attempt to survive by asking help from the U.S. Federal Reserve, which was refused, as well as the possibility of selling itself to either the Bank of America or Britain’s Barclays, also refused as it was seen as a great financial risk in the falling economy. However, the Bank of America did purchase Merill Lynch feeling it was a lesser risk. Also with the collapse of Lehman Brothers the Federal Reserve expanded their supply of money help for major U.S. companies, which later saved A.I.G. when it was also close to financial meltdown. The results of this devastation led to a drop in value of the U.S. dollar and a big fall on the stock markets.

Perhaps the most important question associated with this event is “Why did it happen?” The most general answer to this question that I have found is that Lehman Brothers investment bank took big risks, risks that were too big. Their risks were particularly connected to their loans, leading them to hold large mortgages and property estates. The loans they supplied were too risky, as they could not be paid, resulting in debt and the holding of property estates, which were losing their value in this frequent pattern. Eventually, Lehman Brothers was losing money in this costly risk of loaning. Their stocks began to fall and they were also losing money. They had to ask other large companies for financial, money assistance. While this held them over for a time, it could not sustain the company for long. The debt grew to the point were a decision had to be made either be granted money by the U.S. government or sell the company. Both plans led to failure as their debt was too great a risk for anyone to save it.

nytimes.com; news.bbc.co.uk; business.timesonline.co.uk

1:1 Computers

Initially, I thought this laptop program would create problems including mainly laptop damage from transportation. I also heard of and thought about the problems like distraction during class, the threat of loss or theft, and its true efficiency in benefiting the classroom.

Now we completed about two weeks of this program. I have found that during these two weeks it was convenient to have my computer at school for reasons other than economics. I have also found that it is not as hard to stay focused on work as was thought at first and since I can keep it in my locker during school or with me throughout the day I could easily prevent loss or theft. I still find transportation without damage challenging as on the day of economic classes I usually have additional classes which require textbooks, but I have found solutions to this issue. I also do not trust myself to carry the laptop around school or on moving vehicles and such, so in addition to a laptop cover, I find it convenient to carry it in a bag as well. In addition to all of these comments I would like to add that I have found that during this class a laptop or something similar does seem essential for this course since we use it quite frequently.

What I found surprising about taxation…

I was somewhat surprised to learn that sales tax was regressive. I have never considered the idea before and this concept still leaves me a bit confused. By comparing the percentages between the “poor” and the “rich”, and considering the consumptions and incomes of both groups puts it in realistic terms that are easier to understand. This allowed me to visually compare and realize that while the “rich” and “poor” may spend the same money on basics–as well as sales tax– but, since their incomes differ so do the percentages of their incomes spent. Therefore, the poor lose more of their money than the rich, making the sales tax more regressive. Within these terms I think this concept makes more sense to me, it seems really basic now.

write a blog post outlining which tax system you think is best (400 words)

There are three major tax systems; progressive tax, proportional tax, and regressive tax.  The first, progressive tax system, has a rate that reflects a pattern that increases the tax as the income increases. For example, compared to a lower income, a higher income has a higher percentage of tax paid, whereas the lower income would have a lower percentage of tax paid out of his income. The second, proportional tax system, has a constant rate for the percentage of income paid in tax, or a fixed rate. Therefore as income increases the percentage paid in tax also increases at a fixed rate. The third is a regressive tax system. This system has a flat rate so that as the income increases the percentage paid in tax decreases.

All three of these systems have their pros and cons.

Within the progressive tax system a higher percentage of money is taken from those with higher incomes. This could be a positive thing as it creates equity between classes, and serves benefits to those less fortunate. However, it also takes more money away from those who work hard and earn higher incomes, and uses the money to grant benefits that can be enjoyed by those of lower incomes which seems to question equality. This system is not the most efficient at promoting hard work since those of lower incomes receive rather large benefits and pay a lower percentage in taxes.

The proportional tax system may be considered rather fair as well, because it has a fixed rate for all incomes that prevents preferences towards those of higher or lower incomes.

A regressive tax system may seem unfair as it takes a larger percentage of money from those of lower incomes than those of higher incomes. While this is true it also persuades individuals to work harder allowing them to earn more income and enjoy more of their income.

Overall, of all these tax systems I find myself preferring the proportional tax system, because it seems logically fair. Those of higher incomes pay more in taxes and those of lower incomes pay less, but at a fixed percentage rate that does not change percentages based on income.

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