Sunday, January 13, 2013

Manifesto 2.0

1. If a large corporation is going out of business and causing a large economic down turn and unemployment, I don't believe that the government should subsidize them.  If a corporation is failing, it is for a reason and if the government gives them money to bail them out, it will only fail again in the future.  It's failure shows that their leadership and business strategies are not succeeding or the company is simply not changing with the rest of the world.  For companies to grow and compete there needs to be failure as well as new competition. Yes, people will lose their jobs, but it will also inspire people to create something new and start from scratch. The economy will balance itself out eventually, but sometimes things need to become worse before they can get good again.

2. After looking at the U.S. budget, my manifesto leads me to criticize it because I believe that the government spends too much money.  I feel as though our government spends too much money on national defense.  We try to help everyone in need and we simply can't afford to do that when our country is in so much debt. Spending a trillion dollars over our income is going to catch up with us eventually and my generation is the one that will have to pay. We need to stop worrying about other countries in need right now.  If we are going to spend that much over our income then we should at least be using it to help our economy grow and succeed not waste it over seas. 

3. The debt crisis in our country is outrageous and our government can't even come close to agreeing on anything.  If we dont do something to make a change, we will eventually hit a limit on that debt.  I propose the solution that we cut our spending by a lot, this will at least slow down the debt from rising so quickly.  The things we would be cutting are things such as national defense, because we spend more than most of the other top countries in the world combine.  Also our discretionary spending should also be cut, we do not need to bail out businesses that will continue to fail in the future.  These spending cuts would not take away the deficit but along with some tax increases or possibly a complete change in the way we collect taxes could result in a profit for the U.S. 

Wednesday, December 19, 2012

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?

Monday, December 17, 2012

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 MontrĂ©al 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.


Monday, October 29, 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.