The Econ Club would like to welcome you to the fall semester. If this is your first semester at Georgia Tech, we wish you the best of luck! We encourage you to take advantage of all that Tech has to offer…including our club. We have planned a great semester ahead and look forward to having you apart of it.
We’re gearing up for the first ever Econ Club philanthropy event: an art show to benefit the non-profit Creative Enterprises! Creative offers adults with disabilities a range of programs, job opportunities, and classes. The organization benefits the community through its many green practices, thrift store, greenhouse, and cat shelter. The clients that are part of the art classes create some truly amazing and unique art. Their creations will be the focus of the night, and all in attendance will have an opportunity to purchase a piece. For each piece of art sold, half of the money goes to the artist and half goes back to Creative for more art supplies.
Check out the Creative Art Show page to register and get more info about the event!
Unique artwork isn’t the only thing that makes Creative Enterprises, Inc. such a wonderful place. Check out their website to see all that they do for those in need.
Thanks to everyone who came out to support us today at our 1st annual Econ Club 5K! You can see the photos from the link on the Events page, or simply click here
I wanted to write a few thoughts on the national debt issue, but I soon came to realize that this would be impossible without mention of China. So, I apologize in advance for giving China so much dang attention.
You hear many politicians and political commentators go on and on about the dangers of an ever-increasing national debt, but where is the real harm? Besides the rising costs associated with my grocery list (which I believe is due to inflation from quantitative easing*), I know that I’m not currently feeling any other major and identifiable ill effects of the national debt sitting in my meager dorm room at Georgia Tech. But is all this “out-of-control spending” really taking a toll on the way of life in America?
Is debt actually a bad thing? We know that debt helps us raise our current standard of living by utilizing expected future income. Homes, cars, new businesses are a few examples of how debt is incurred to produce some type of profit, whether the profit be in terms of wealth or asthetic feel; anytime a higher standard of living is achieved a profit has been made. But how much of our higher standard of living is a true profit since it’s becoming more questionable if we can reimburse our creditors?
Is foreign debt really more of a problem? As a dollar-denominated asset, shouldn’t the dollars naturally flow to the economy where US dollars are accepted to purchase real goods, AKA the US market? – But really, the US dollar, as a currency is just some claim over wealth, productive ability that can be exchanged for other real goods and services. The US dollar is a depreciating asset (as a result of inflation), but an asset that is expected to be less depreciating than other currencies; so foreigners and US citizens choose to hold the value of their wealth in the depreciating asset, the US dollar, while charging interest.
It seems that a wise lender would never lend out more money than they expected to receive at a future date. So, surely a major investor and economically booming economy such as China would cease purchasing US debt as soon as it became unprofitable. So, if the US government is broke and becoming ever-risky to invest in, why would China continue to buy US debt? For one, US debt is still considered the safest place in which to invest relative to the debt of other countries. Secondly, China buys US debt because they believe it is a self-interested policy.
China has created a booming economy in large part by pegging the Yuan to the US Dollar in order to dramatically increase exports (by undervaluing the Yuan, overvaluing USD, and effectively making Chinese goods very cheap to Americans). Pegging the Yuan to the US Dollar is achieved by the Chinese government deciding on a certain Yuan/USD exchange rate and buying the amount of dollar-denominated assets (think US debt) in order remain at that certain exchange rate. So basically, in order for China to ensure a continuously stimulated export market, the Chinese government must buy an unnatural amount of Treasury securities. If they cease buying treasury securities, the Yuan will appreciate relative to the US dollar, Chinese goods will be effectively more expensive having a devastating effect on their export market and essentially the entire Chinese economy. You will rarely hear me quote Keynes, but he puts China’s dependency on the US rather eloquently: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”
In fact, upon writing this article, I took a short bathroom break and decided to share my experience for the weak-stomached academic readers. Sitting on the toilet I peered down to my very western navy shorts that hung around my ankles, only to find a small beige tag with green lettering that read, 100% Cotton, Made in China. What a simple reminder of the standard of living the Chinese government sacrifices on behalf of its people so I can more easily afford my favorite style of short shorts. Will the tables ever turn to rebalance the standard of living China has so generously provided for us?
If you’ve actually come this far, I encourage you to finish by allowing Jon Stewart’s wisdom spill into your soul…
|The Daily Show With Jon Stewart||Mon – Thurs 11p / 10c|
|Broke Bank Mounting|
*Quantitative easing has depreciated the dollar by increasing the money supply, resulting in inflation. And while a depreciated dollar may raise exports, making US goods effectively cheaper to other countries, it lowers the return on dollar denominated assets (think US bonds); so essentially the amount investments made in dollar-denominated assets will decrease, and the US government is caught with its back against the wall, having to raise the amount of interest they pay out to their investors.
-Written by Stephanie Jackson
The Econ Club will be setting up at the Opportunities at Tech portions of FASET this year. Any members are welcome to come advertise the club with us, just shoot an officer an email and we will work that out. If you are reading this post as an incoming freshman who found us there, then you are at the right place! Welcome to Tech, and keep checking our calendar for our fall events!
If you take a look around China one thing you’ll miss is western culture, but there is definitely no lack of designer clothing. I was strolling through a mall to find some recognizable food, and I caught a glimpse of the Spring 2011 Louis Vuitton collection on a random girl walking through the mall. I had to double check, so I did a double take and there it was, a fabulous LV dress. The thing that surprises me the most is when I look around, I find that the people are a little uncouth yet they know that buying designer clothing signifies that they are more than that. For me this came down to a signaling game, what do these people signal when they put their life savings in one dress, or if they can afford much more than that where is the money coming from. I think it’s fascinating that I packed clothing that I didn’t mind ruining while the locals prance around in Dior and Chanel because the perception of being wealthy is so important here. When people put on a dress worth more than some make in a year, what are they trying to say. Is it that they are worth the diamond that they’re trying to convince you to buy? Who knows. `
For the most part when people mention China, I think to myself it’s a growing power and hopefully perhaps one day it’ll be the hog that we all take from. When the reality of going to China hit me a few days ago, I had forgotten what it really meant to be in Communist China. I had grown up in Hong Kong where laissez fare was a given. After two weeks of adjusting to the time difference, I have made several observations. When our LBAT (Language Business and Technology) program coordinators were talking about how wonderful China was, I was completely sold but after being thrown in this madness the truth is China is disappointing. Perhaps I had hyped it up for myself but my expectations of China and what it turned out to be was not the same. I am currently in the XueJiaHui district of Shanghai, and I am shocked to see that China is not only extremely dirty but also more run down. Although the country is on the rise, there is still a large gap between the rich and the poor. The Pudong area is very much developed with tons of high rises and very modern architecture, but when you take the subway perhaps three subway stops down you will find run down homes and beggars everywhere. China is definitely developing, but it may not be growing as fast as people make it out to be.
While browsing YouTube, I found some interesting videos I wanted to share. These take a fun approach to a serious economic debate.
This first video focuses on economic booms and busts : “Fear the Boom and Bust” A Hayek vs. Keynes Rap Anthem
Keynes’s view is that a vicious cycle develops in economic busts, as nobody has enough money to begin buying things again- therefore, the government needs to pump a lot of money into the economy since nobody else can. Hayek’s view is that the boom is the problem- people make unwise investments (such as the recent housing boom), which eventually collapse, and pumping more money into the economy will only lead to more unwise investments. Interest rates are a major point of disagreement between the two: Keynes thinks they should be low to promote borrowing and spending, but Hayek thinks they should be left up to the market.
This second video focuses more on government spending: Hayek vs. Keynes Round Two
Keynes claims that his theories have been proven right both by the recession officially ending in 2009 and by World War II (a massive amount of government spending) ending the Great Depression. Hayek emphasizes the limits of government intervention, pointing out that (a) government intervention is likely to be distorted by political cronyism and (b) the economy is too complex for any intervention not to have unintended consequences. He criticizes the idea that the economy can be boiled down to a few mathematical formulas.
In terms of today’s politics, President Obama is a Keynesian (not Kenyan- I’m not a birth-certificate nut), while Hayek would fit in well at a Tea Party rally.
- Written by Jeff Ditzler, Author of The Big Ditz Blog
I wake up every morning complaining about the temperature in my house, and I secretly change the AC to 74 hoping my mom doesn’t notice the difference in temperature when she comes home from work. Everyday she gets home I hear a loud, “Who turned down the thermostat!” Guilty; caught red-handed but it was worth a shot.
Today I wake up and go check my emails before my study abroad trip to China tomorrow and find an email that says dormitory accommodations. I think to myself, “we’ve been over these a million times, what else is there?” Well, long story short, my email said apparently we were mistaken, and we don’t get our own bathrooms which I don’t mind as much. What comes next is the ridiculous part. Showers (water) that we take for granted (think is free) and spend 30-45 mins on everyday will probably be limited to a 10-15 min shower at best, and also I will be paying 3 RMB per use of the shower (approx. 50 cents). On top of that instead of housing paying the electric bills and having air conditioning on all day, each individual student will be responsible for their own bills at the end of the study abroad experience. If me and my roommate limit our use of AC and other electricity, our individual bills will still be around 25 dollars for 6 wks.
Perhaps this doesn’t blow other peoples’ minds as much as it does mine, but I am blown away. I lived on campus my freshman year of college, and I remembered being cold all the time because temperature was never higher than 68. The water pressure was amazing, and I took 30 minute hot showers taking my sweet time because I knew that the hot water would never run out.
I guess this is how people in China live, and now I get to immerse myself not only in the language but also the lack of commodities I know I take for granted. Even a growing country such as China that has close to double digits in growth cannot provide the commodities that we take for granted.