So about this project, and blog posts; I've been slacking on it for a while. I just posted blogs 7 and 8, which were due sometime the week before last week. And now, I'm doing the reflective post, which was due last week on Wednesday. Great work habits. But anyway, the project has been coming along pretty well, besides the fact of the extremely late work.

I've been thinking about the project, and how it's at such a high level of professionalism. I mean, we have to contact change agents, write down an action plan for the change agents and expect them to do something about our project. If the topic chosen needs funding, a source needs to be found. It's a lot of work, and it requires a lot of patience and discipline. It feels like I have both of those at times, but recently I've sort of lost them. Luckily, I think I've also gotten them back. I mean, I am writing these blog entries. I could either write these blogs, or not write them. But I chose to. Oh, and one last thing, resources have recently been a pain to come across--good resources at least. On that note, posts 9 and 10 (Unfortunately the final ones) will be posted later this week.

Both blogs 7 and 8 can be related since they both have to do with solving the problem of inflation in the past. Post 7 was from '52, and 8 is from '80.

Here's the document I found. It's downloadable as a PDF file.

The document has some relatively modern ideas, even though it's from 1980. That shows the similarities of inflation in both old times and new. People look at inflation in one point of view. The point of view is "This is inflation, and what it is. This is how we can solve it." That's how inflation is looked at in both today's world, and the world of the 1980's.

I was reading though the one-page file, and a couple of sentences really caught my attention. They read "Inflation never has and never will go away; We think were intelligent reason motivated decision makers still our company and country leadership still talks about inflation "Going away" Never!" Agreed, about the inflation will never and has never gone away part. Inflation can be lowered to a very small percentage, but is extremely difficult to get rid of, and according to the file, impossible to get rid of.

So, instead of trying to get rid of it, the article gives ideas on how to lower it. Here are a couple of them: "Stop catching up; no increases of any kind for 90 days; Hardship - yes - otherwise disaster for everyone; Have no cuts in the value of our money; report the decreases in the value of our money instead of "inflation" decrease in cents per dollar".  It's kind of hard to follow, since it's more of an outline than an explanation, but nevertheless gives you an idea of how economists would solve inflation back in the 1980's. The page even satted that a movement should be lead, and when directors are unclear, that is the time for a thrust. I wasn't too sure what the author meant by this, but It was a pretty interesting little find.

It's been quite some time since I've written a blog, which is completely my fault; I am a week or few weeks late on these blogs. But, here goes the seventh of ten epic blog posts about the economy, and where it's headed.

So, I was searching for a bit, trying to look for something to blog about, and I ran across, a TIME article . I was reading it, and tried to make sense of it, but it was so hard to comprehend and understand. It seemed like it was a few paragraphs quoted from a report and written into an article. I thought it was from the present day, but I checked the date on it and it's from March 10, 1952. I started to break it down to try and understand it.

This is the first paragraph of the article: " Just as many labor contracts are tied to the Bureau of Labor Statistics index of consumers' prices, so billions of dollars worth of business contracts are tied to the BLS wholesale price index. Frequently, the delivered prices of new ships, houses, engines, etc. depend upon the fluctuations of this index from the time they were ordered."  From reading that a few times over, I know that back in 1952, labor contract were tied to the BLS. All of those contracts summed billions of dollars, and it's all tied to the BLS. The price of certain products depend on the BLS index. Interesting...

The article then went on to say--if you lived back then-- that just lasy week this important index underwent a big change. The index was brought up to date by including scores of products (television sets, antibiotic drugs, plastic materials, Orion, frozen foods, etc.) which existed with rarity when the old index was drawn up in 1932. So when the index was brought up to date it was such a big deal because it hadn't been updated since 1932. Several hundred other commodities have been made since then. Updating the index would allow a more accurate cross section of present day markets. The second change, which brought up criticism, according to the article, was that the index base started at 100 instead of 0. Thus, when the old index ended it was recorded at 174.8, which would only be 74.8% above "normal". The new index stood at 111.7, only 11.7% higher. The article ended with "Cried critics: a handy device for the Administration to hide the effects of inflation in a presidential election year."

It was interesting to read something about the economy and what was happening with it back then in 1952. The way this article was written was completely different then present articles written about inflation, and the economy. Back then, it seemed like the articles were written so that people with some kind of economical background could understand it. It's the same today, but the severity of it is lessened. Otherwise, it was an enlightening piece.

So it has been quite a journey. Six out of ten blog posts have been posted, the rough draft of the E-pitch has been written, and I barely got any sleep. But anyway, about the E-pitch or better known as the Elevator pitch, was not difficult, but more of a stress kind of thing where you think "Oh, geez, I have to do THIS on top of everything else." It wasn't that easy either. I had to write in everything about Inflation and economic collapse onto a paper, a paper that I'd have to turn into someone who is a professional at the topic. My change agent, an economic professor at Drexel e-mailed me back, and said he'd be glad to look at the e-pitch, but he's in San Diego. E-mail is a great tool.

Referring to the previous paragraph, I first thought of doing an imovie for the e-pitch, since that's how everyone else did theirs. Immediately, I checked iMovie. Obviously, I didn't think through the choices. I looked back at the choices and decided to do a written report, since I'm pretty strong in the writing, and a bit shy in front of the camera. 

Now that the entire e-pitch has been explained, let's move onto research. My research has been very good, and easy to find. Probably because inflation is such a worldly issue. But I've been able to find some good articles, videos, and information of inflation. Mostly stuff about interviews -- with well-known economic persons -- articles on why inflation happens, and a helpful video on what inflation is, even though it is from the 60's. 

Yes, it has been a journey, but an interesting, educational, and sleep deprived one.  

Continuing on from the last blog post, where I stopped short on the precious metals district, I've decided to dedicate this blog to the precious metals. So, here it is, a blog about of some of the world's most valued possesions; Gold, and silver, and of course, platinum. 

It seems odd that I'm posting about precious metals on a blog that's about the economy. But, precious metals has quite a large part in the economy, and is something that is a worthwhile investment that can probably save your behind in the future when inflation really kicks in, or simply when the US economy fails. Of course I'm looking at it through the eyes of someone who lives in America, and who worries about the American economy because America is where I attend school, and will grow up.

Getting back to the point: This article, explains the change in gold's and silver's price this for this week. "Gold prices settled slightly higher Friday after an economic stimulus plan announced by President Bush failed to soothe recession worries, boosting the metal's appeal as a safe investment." Can be read from the first paragraph. It's a safe investment. Mainly because it's something that has material value. If you buy gold, it can back up your money and get you money while you own it --which is exactly why it's called an investment. Through experience and knowledge, there are possibilities to make a 45% profit on gold and silver as investments. 

Gold had risen over $900 just last week, and will breach the $1000 dollar mark in the months to come. As crude oil prices, and inflation rates increase, the price of all precious metals increases. That's what happens most of the time, anyway.

Silver rose 20.5 cents to end at $16.215 an ounce. And for platinum? $2,025.

The market has been a bit volatile today, said James Steel, analyst with HSBC in New York. He then said that we're still in the correction phase. The market is so 'volatile' because "Gold prices swung almost $50 this week, rocketing to an all-time high of $916.10 Tuesday and plunging to $870.60 Friday..."

Looks like money really does control the world. I guess I did learn something in sociology today. There's gold, and oil, which determine and/or influence inflation rates. (They alone do not influence the inflation rate, but are a large part of it). And inflation is directly connected to the economy. And the economy has to due with capital. 

I was looking through my RSS feeds earlier today --since I hadn't checked up on them in some time-- and found several articles relating to China's economic growth and risks, and articles about precious metals. Under the headlines, sentences were pulled from the articles to give an idea to the viewer what it's about. I saw a couple of headlines about China like this; "China Sees Inflation Pressure Growing: ...is confident inflation can be held to its 4.8 percent target this year, financial officials said Thursday. "We will face increasing pressure for price rises...” and one other read, "China's Premier Discusses Economic Risks: ...From both inflation and a global economic slowdown, sounding a cautious note as he begins his second term." The headlines for the precious metals were different, due to the change of subject. I looked at two, which read, "Gold, Platinum Hit Record Highs: ...concerns about inflation and energy supplies spurred a continuing flight into hard assets." And the second one, "Precious Metals Fall Despite Dollar Drop: Precious metals prices fell sharply Thursday, ignoring a tumbling dollar and spiking crude prices after South Africa said it would ease power rationing for some of the world's biggest gold and platinum mines. Other commodities traded mixed, with crude..."

Those were the first headlines I saw when I scrolled about a third way down the first page of feeds. I scrolled down even more, and --no kidding-- saw another dozen articles about China's economy. Since China was the subject of the week, I decided to read up on several of the articles.

This article explains China's economic pressure, due to food shortages and a credit boom. "Inflation 'will be the No. 1 item on our agenda,’ we have the means to achieve the targets." the chairman of China's planning agency, Ma Kai, said. China's inflation rose to 7.1% in January, it's highest in 11 years. One of the problems Communist leaders worry about is possible political fallout from rapid price rises, especially for food that has battered Chinese consumers and threatens to erode rising living standards. Bouts of high inflation in the 1980s and '90s sparked protests. Ma believes that the government is too optimistic, and that the government is still underestimating the risk of inflation.

I thought it was very interesting how Ma said that inflation would be the No. 1 item on their list. In the United States, the Fed is cutting interest rates as their priority, instead, the Fed seconded inflation. Economists in the United States believe that the Fed should fix inflation first, rather than cutting interest rates. I wonder how China's economy will play out compared to the United States since they're trying to fix inflation first instead of other less severe economic issues. We'll have to wait and see how everything plays out. Then, we'll be able to tell whether cutting interest rates was a better idea, or fixing inflation was a better idea.

I was reading an article from the SFgate economy section, about inflation, and the author, Martin Crutsinger, explains several different factors on why inflation is increasing. The rise in inflation was seen in January, where the price in gas, healthcare, and food rose. Specifically, crude-oil prices rose to $100.01.

Crutsinger writes "The Fed has cut interest rates aggressively in the belief that fighting off a threatened recession is more important than worrying about inflationary pressures." Even if the Fed is trying to fight off a threatened recession, inflation still plays a part in the recession. Deflation, inflation, and stagflation is what makes a recession happen. The Fed should work on decreasing inflation. Instead of looking at the future (threatened recession), they should look at what is happening now (inflation, and possible stagflation). If anyone was wondering stagflation is persistent inflation combined with stagnant consumer demand and relatively high unemployment. 

Further into the article Crutsinger mentions that Core Inflation, which excludes energy and food, rose by 0.3 percent, the largest jump in seven months. That increase reflects rising prices in education, medical care, clothing, tobacco and airline fares. With this increase, core prices have risen over the past 12 months by 2.5 percent, which happens to be over the Fed's comfort zone which is 1 to 2 percent gains in the underlying inflation rate. 

With the increase of inflation, the housing market remains in a steep downturn. Construction of new homes and apartments  went up a slight 0.8 percent resulting in an annual rate of 1.012 million units. Applications for building permits fell by 3 percent for an annual rate of 1.048 million units. 

"'Clearly the housing recession continues with no end in sight,' said Bernard Baumohl, managing director of the Economic Outlook Group, a private forecasting firm."

Some economists believe growth in this quarter will turn negative,  fulfilling the true definition of a recession. I guess we'll just wait and see.

I was searching through my feeds, and came across another video about the United States fiscal crisis. The video talks about David Walker. According to Steve Kroft, of 60 minutes, David Walker is the nation's top accountant, the comptroller general of the United States. He has also totaled up the United States income, liabilities, and future obligations, and concluded that our current standard of living is unsustainable unless some drastic action is taken.

Walker states, "I will argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan, but our own fiscal irresponsibility." A few more minutes into the video, Kroft states that President Bush would argue that the economy is in good shape. Unemployment is down, and the deficit is actually less then expected. Walker argues that there isn't an immediate crisis, and as a result, people ask "what is the problem?" Walker answers his own question and states that the problem is a "fiscal cancer, that is growing within us, and if we don't treat it, it could have catastrophic consequences on our country."

Part of the problem is caused by a demographic glitch that happened more than 60 years ago; a dramatic spike in the fertility rate called the baby boom. Starting next year, and twenty years thereafter, 78 million Americans will become pension holders, and medical dependents of the US taxpayer.

The day a baby-boomer hits 62, and is eligible for retirement and social security was January 1, 2008, and in three more years, they will be eligible for medicare. When the baby-boomers start to retire in mass, that could cause a huge amount of spending that could swamp the United States.

Personally, I think this is a huge issue that the United States has to look at now, or in the near future. There isn't much time left to try and fix the problem. Baby boomers are going to start retiring in mass in the next two to three years. Social Security isn't the largest problem, but Medicare is far greater. Since people are living longer, medical costs keep rising at twice the rate of inflation. If not looked at in the next year or two, America is doomed to see a financial crisis. Looking at the problem in an extreme, the United States of America could possibly turn out to be like pre World War I Germany. History is doomed to repeat itself.

So, I ran across an old film about inflation. The narrator, Edward G. Griffith, explains inflation in an understandable, and fairly simple manner. Although the movie is from 1969, it still explains inflation very thoroughly. Its not as if inflation can be outdated, it will always be the same, no matter what time period.

The film is done on an old projector, with no actual video, but with slides of pictures.

Griffith uses an example to describe how shoppers would react to inflation. Mr. and Mrs. Jones, a married couple enjoying the American dream are strolling thorough their "Material wonderland" and showing concern only when something distracts them. Griffith then goes on to say that when Mrs. Jones picks up a loaf of bread and sees that the price has risen from 39 cents to 42 cents within a week. She complains to Mr. Jones that everything is going up. They are quick to blame the store, the baker, and the wheat grower.

"When a government has the power to create money, those in power simply create new money whenever they want more money to spend. History clearly shows that governments have been the most consistently guilty party in the inflation of the money supply." Said Griffith. Another example of inflation would be World War 1 Germany. The government paid off bills by printing more un-backed money. This reduced the cost of a German mark to 162 per US dollar from 4.2 marks per US dollar. This became so severe, that the German mark fell to 4 trillion marks per US dollar in November 1923.

Eventually, million, billion, and trillion mark notes were printed. A sack full of money could only buy a loaf of bread. Those with fixed incomes, savings, and investments lost everything they worked a lifetime for.

Inflation can be a severe issue. The United States suffered an inflation issue in the 1980's, where inflation rose to a record 20% in 1981. Luckily, Inflation fell back down to 3% in 1983. This is exactly why inflation should be looked at as a serious issue. People who follow news reports, and economic reports may know of it, and several thousands may be ignorant of the fact of inflation, as Mr. and Mrs. Jones were.