2024

It's 2024 now and I am 30 years old...looking back at economics my senior year I thought that our country was just gonna go down hill, but as the years went on after I graduated we had a large step up in leadership for this country. Our country learned how to begin saving money and cutting down deficit spending. After 12 years our debt has gone down very slowly but surely. The times were tough for awhile but our economy is rebuilding and becoming stronger. I got my degree in engineering so jobs arent hard to come by for me, but a lot of my friends were suffering for awhile. We have created many new jobs.  The only thing I hope is that we dont become "too big to fail" again. The outlook is good for the future of the United States. I wonder what it will be like when I'm 40?

Charles Ponzi, Yo.

What if I told you that there was a way to make $200,563,872.82 in eight months?  That is the equivalent amount of money that Charles Ponzi made in 1919 when he set in motion one of the largest financial frauds in the twentieth century.  Charles Ponzi was known as a financial genius to some people, but he was nothing more than a greedy criminal who liked to push his luck.

                Ponzi was born in Italy in 1883 and immigrated to the United States when he was twenty. Entering the country with barely any money to his name made it very tough to survive.  His criminal background began shortly after when he was arrested for forging a check in Canada and sentenced to one year in the Montréal prison. Soon after he returned to the U.S. and designed a scheme to smuggle people into the country illegally.  This also got him arrested and put back into prison.  When he was released he headed to Boston, where he married a woman named Rose and took over a grocery store. He obviously wasn't very good with money because the store eventually failed and he was forced to get a very low paying job as a translator. This is where he came up with an idea that would make him millions.

                At this time, Europe’s economy was in a very deep depression due to inflation.  Ponzi realized that he could take advantage of the international exchange rate between the U.S. and European countries.  He would buy International Postal Union coupons in Italy for one cent each and have them mailed to him in the U.S., where he would redeem them for five cents each, for a total of 4 cents profit.  This doesn't seem like much, but on a large scale with lots of investors it can grow quickly, and that’s exactly what it did. Ponzi swiftly convinced thousands of people to invest, promising them 50% profit within just three months. All of the money coming in from new investors allowed him to pay the old investors and keep the scam going.  This is now what we call a pyramid scheme. It begins at the top with a single person or entity and expands beneath (like a pyramid) with many investors coming in expecting a high profit in return. The only people that make a profit are the ones that jump on board very early in the scheme. Everyone else loses money in the end.  A true investment has a business model that involves a product or service to create wealth. For example, you invest in an old beat up house with $50,000 to rebuild it and fix it up, and then sell it for more money, creating a profit.

                Ponzi became known as the “Wizard of Finance” with so much money coming in that he made an astonishing 15 million dollars in only eight months from over 40 thousand investors. On his single best day, he made two million dollars.  This made the public crazy and anxious to know more about him. When it was first on the rise, Ponzi was able to get rid of the press with large lawsuits, but eventually it was going to be investigated.  His scheme worked very well, as long as there was a constant flow of money coming in, but when the press began talking about his crimes in the past, it scared investors. People began demanding refunds and the steady flow of new investors stopped. Without any money coming in, he couldn't pay anyone back, causing his scheme to fall to pieces.  He ordered his employee’s to pay off all debts, but there wasn't enough, leaving about 5 million dollars of debt. 

                Investigators were stunned to find how unorganized Ponzi’s scheme actually was.  He had things recorded and filed completely wrong with tons of missing information.   He also had so much money coming in that he had money stashed in drawers, garbage cans, and closets.  Ponzi was sentenced to four years in prison for using the mail to commit fraud.  After he was released, he was arrested again for his hoax, but this time charged for theft and 9 years in prison.  He posted bail and fled to Florida, where he came up with another scam.  This time he promised a 200% profit to his clients, but was soon arrested and convicted.  He spent one year in a Florida prison, when released, he was forced to return to Massachusetts to serve his 9 year sentence.  After he was released, it is not entirely clear what he did next.  People say that he moved back to Italy and worked for Mussolini, but fled to Brazil after he was caught stealing money from the government.  Brazil is where he died at the age of 66 and his funeral took his last 75 dollars. 

                Overall, Charles Ponzi was a very greedy man who became addicted to scamming people and couldn't play by the rules.  He created one of the largest Pyramid schemes ever known and will always be remembered as a notorious criminal that taught the nation a lesson about investing. 

Blumenthal, Ralph. "Lost Manuscript Unmasks Details Of Original Ponzi." New York Times 5 May  2009: A21(L). Gale Student Resources In Context. Web. 27 Nov. 2012.

"Charles Ponzi." U*X*L Biographies. Detroit: U*X*L, 2003. Gale Student Resources In Context. Web. 27 Nov. 2012.

"Charles Ponzi Cheats Thousands in Investment Scheme, 1919-1920." Historic U.S. Events. Detroit: Gale, 2012. Gale Student Resources In Context. Web. 27 Nov. 2012.

"Pyramid Scheme." Everyday Finance: Economics, Personal Money Management, and Entrepreneurship. Vol. 2. Detroit: Gale, 2008. 674-675. Gale Student Resources In Context. Web. 17 Dec. 2012.

Minimum wage

As a member of the working demographic affected by market equilibrium issues, I believe that minimum wage should stay the same.  If we raise it then it will cause a massive increase in unemployment because business owners will have to cut a lot of their employees.  It could create a better life for those that keep their jobs and are able to work through it, but it would also send all of the other people who lost their jobs even more into poverty.

Price ceilings

I disagree with having price ceilings in our economy because it creates a shortage of products. This can lead to a black market and cause a lot of problems.  Many suppliers would shut down and try to find other products worth selling to make more profit, while consumers would buy it at store price and re sell it for more due to the shortages of that product.

Price floor

I agree with having price floors in our economy for certain products such as alcohol or other related products.  This will either cause a decrease in consumption or it will help the economy dramatically.A decrease in consumption would effect a lot of things such as less drunk driving, less under age drinking, and many other health issues. It could also help with our economy if people are unwilling to drink less frequently then our country will be making a lot of money.  Even with a price floor, that doesn't mean an unrealistic price where no one would buy it.

Supply Wrap Up

Demand Reflection

In my life I never noticed how many products I bought to compliment another product. It never occured to me that stores and business owners are trying to get you to do that. My family goes shopping all the time and we buy certain things to compliment other things such as chips and salsa. When we go down the chips aisle and grab a bag of tostitos, we aslo grab a container of salsa. Which, just so happened to be conveniently placed right there.
When I was a little kid I wanted a skateboard really bad so we went to the store to buy one, but when we got home I had a lot more stuff than planned. All of the complimentary products that I had to buy with it were also there.  I ended up buying a helmet and pads, and some extra wheels. Complimentary products are in our everyday lives and sometimes we dont even notice.

I wonder how big companies end up becoming compliments with other products.

Demand Wrap Up

 

Inelastic vs. Elastic

Demand schedule and graph

Demand headlines

Substitute demand - "Plane tickets triple in price, demand for train tickets Soar"
Complementary demand - "The fourth is less than a day away and barbecue items are flying off the shelves"
 Elastic demand - "Dr.Pepper prices drop, Consumers stock up"
Inelastic demand - "Oil spill goes straight to the pump, consumers not happy"

Last week one of the biggest oil companies in the U.S. had a major oil spill. The captain opf the ship was heavily intoxicated and didnt notice a giant rock that the ship was heading towards and cost them millions. The company is now also being sued because of previous oil spills. Gas prices jumped one dollar in the last two days and are still increasing.  With the gas prices going up consumers are converting to riding their bike to work, but with Oregon rain on its way consumers are getting frustrated. This company needs to do some self evaluating if they want to get back to the top.

What I learned today- 9/21/12

I read the article "11 Years After 9/11, Afghanistan Still Matters"  We all remember 9/11, My generation grew up with that as the huge attack on the united states.  We have all seen people affected by it in this country, not just from the day itself, but from all the after events.  It has lead to war for 11 years and troops have been lost, family members, loved ones, everyone has been affected somehow.  But when we think about that day, we don't think about the people in Afghanistan.  I really like the fact that this article takes a look at the other side of this war too.  A lot of the people in Afghanistan didn't know what was going on 9/11 or why the USA were now coming into their countries.  Our economy was affected by the war, but Afganistan was also affected by it, at least we didn't have to deal with a war in the United States. 

Another point that this article covers is the debate on the war during elections.  A lot of people here are tired of the war and believe that it only has a negative effect on our economy.  I personally believe the same thing.  This war has been going on for too long and we need to focus more on our economy and getting the country out of this recession.

Blog #3

Our economy is a great way to satisfy everyone, but it creates competition to survive.  Some people such as the elderly or children cant survive on their own, there are also the people that just cant survive in the market economy.  To succeed you must be willing to work for it and sacrifice some time to do it.  This system has a lot of potential to succeed, but it fails when people aren't willing to work to survive.

A great advantage to this economic system is that everyone has a right to own something and contribute.  Our rights are very important to us as a nation and this allows us to be free. Compared to socialism, we can grow and expand way faster.  Socialism can be great to start out with, but eventually their will be a ton of people under the government and it could go bankrupt.

Overall, I believe that a market economy can be the best for a nation in the long run. It allows people to compete and grow as a business.  Production gets more advanced and people solve their own problems in the world.  We have a problem of using too much fossil fuels right now, but in the future we could be using a different source for energy.

I wonder how we're going to solve that problem as it gets closer and closer all the time. 

Opportunity Cost

I have had many opportunities in my life, and for every opportunity, I had to make a choice.  For every choice that I made I had an opportunity cost.  The last big opportunity that I had was going to visit my dad.  But at the time I was employed and still looking for another job.  I didn't want to risk going to Utah and miss a job opportunity because I couldn't come in for an interview.

I called my dad and talked to him for awhile about it and asked what his plans were for that week and if it was worth flying down there.  I also had just put in a resume at Papa Murphy's because a friend told me that they're hiring.  The manager had also talked to me a lot when I came in to submit it, which made me think that they are really considering me for the job. I talked to my Mom about it and she made me realize that I probably won't get another chance to fly to Utah for awhile so I got a ticket.

The day that I flew to Utah I was nervous that I would get a call all day.  I got off the plane and my dad picked me up so I hadn't thought about it for awhile. The day was going pretty well and I was visiting all my family members, when all of the sudden my phone started ringing.  I looked down thinking it would be my Mom asking if I made it there ok or a friend asking to hangout, but it was an unknown number. I answered and it was the owner of Papa Murphy's offering me a job interview.  Luckily he was reasonable and I got the interview the day I got home.  It could have been a very big opportunity cost for me. I wonder how large business executives handle large opportunity costs?

Scarcity, yo

Jobs are very hard to get in this economy. There are a lot of people looking for jobs right now and it creates a lot of competition.  It took me 5 months to get an interview and get hired.