Steven’s Blog

The topic I love to figure out and deal with is Developmental Economics. A lot of what is talked about is developing economies. What is interesting to me is how much the most developed economies still need to develop.

In my opinion, developmental economics is where micro meets macroeconomics. Development needs to happen in the smallest city to the largest country, no one is done expanding. In developmental economics the lingo changes though. Steady states and stocks vs flows are discussed.

Before we move on, let me mention what a stock vs a flow is:

Flows are your accumulation, etc.
Stocks are what you have, store, or keep

Your income is a flow, your wealth is your stock. Developmental Economics tries to increase stocks in the long run by maximizing the potential flows that can be created.

It is because of this that I love the topic, it is not short term!! It is doing it right!!

Steady states include output and unemployment. The steady states are effectively the long run aggregate demand/supply.

When building an economy, you do not want to overweight tourism/foreign investment or debt and you do not want to stop reproduction or allow killing of populations. I love researching recessions and depressions because it shows what stops economic development.

Most of the time when a recessions occur there is a loss of money in the system. In economic language, the money supplied does not equal the money demanded. The federal reserve now has control over the money supply; however, they supply it in the form of loans to banks. The banks loan to each other, and then to consumers. This multiplication effect causes two markets: a product market and a paper market. A paper market refers to exchange of money with no other goods exchanged. This is taking out a loan from someone else’s savings. When a person fails to pay their loan this paper market fails. This is the number one cause that I know of for recessions. The issue is that we cannot take all debt away all of a sudden. If we were to take all debt away tomorrow, a large enough portion of the consumer expeditures would disappear and a depression would occur.

Tourism and foreign investment is just as bad as debt. The allure of tourism is: we spend our money but to continue expanding the economy we can get a stranger to come and spend their money. While this is good for the short term, promoting and expand tourism can yield a false hope for the future. Foreign investment has much the same effect except that they are adding supply instead of damand. I did a case study for an international economics class on Tailand in ninties. This is also mentioned in Commanding Heights (part 3 - I believe) as televised on PBS. Tailand went into a 7 year recession because they allowed foreign investment and tourism unrestricted.

I have never understood how having fewer people improves an economy. The only thing that is improved by having less people is income or assests per person. There are international organizations that are going to developing countries and promoting population controls such as only having two kids or only having one kid. If these economies were free they would grow as shown by Hong Kong, Japan, western parts of Germany, and US. The more people, the stonger the economy if free. Now you might ask, China has over 5 Billion people why are they not a power house. Well, central planning of communism as we know it does not allow for capital appreciation or motivation. Just a slight bit of freedom in China has tremendously improved the standard of living there. I could continue on China and there are many articles so I am going to stop.

It is not really because of college that my views have changed. It is more or less the issues that listening to on the news and hearing various opinions of friends have changed my views. When my ADHD is not kicking in and my class projects are not in the way… I will describe my personal view on verious topics.

*This Blog is not complete yet, people have asked for it to come up. I am going to do more research on this and edit it later.*

You might wonder why I titled this section New Deal, Temporary Deal, and Good or Bad Deal? Well, in my way of thinking about the New Deal there is more than one measure of how the programs worked. Effectively, I am doing an informal policy analysis on each program. A lot of new deal programs were temporary and their short term effects were good. Yet if programs would have lasted they would have been inefficient. Really, that is the same reason industries die, they have a short term use but not a long term use.

In my high school research of the New Deal I remember two eras of the New Deal: the 1st New Deal (1933) and 2nd New Deal (1935). In my Social Work Class, 3303, we discussed 1929-33 as the period of denial, 1933-35 as the Era of Emergency Reform, 1935-1937 The Era of Institutionalized Reform, and 1937-1941 as the Era of Policy Stalemate. Because the classical idea of the New Deal says FDR did it Hoover will not be discussed. So, I am going to twist it again!!I am going to say the emergency 100 days, emergency reforms to the Judiciary Reorganization Bill of 1837, and stalemate to WWII. I am not going to include WWII because wars stimulate economies and after the war was a boom in the economy (thus it being a new era).

Right now I am going to list the acts by the categories they are in:
Emergency 100 Days (March 4, 1933-June 16, 1933)-
Emergency Banking Act (March 9, 1933)
The Economy Act (March 14, 1933)
Civilian Conservation Corps (CCC March 31, 1933)
Executive Order 6102 (April 5, 1933)
Federal Emergency Relief Act (FERA May 12, 1933)
Agricultural Adjustment Act (AAA May 12, 1933)
Federal Emergency Relief Act (FERA May 12, 1933)
Tennessee Valley Authority (TVA May 18,1933)
Securities Act of 1933 (May 27, 1933)
Home Owners’ Loan Corporation (June 13, 1933)
Glass-Steagall Act (June 16, 1933)
National Industrial Recovery Act (NIRA June 16, 1933)
Farm Credit Administration (June 16, 1934)

Emergency reforms to the Judiciary Reorganization Bill of 1837 (March 9, 1937)-
Twenty First Amendment (actually proposed by congress and ratified by the states
December 5, 1933)
Tydings-McDuffie Act (March 24, 1934)
Johnson Act (May 14, 1934)
Securities Exchange Act (June 6, 1934)
Reciprocal Tariff Act (June 12, 1934)
Indian Reogranization Act (June 18, 1934)
Rules Enabling Act (June 19, 1934)
Communications Act (June 19, 1934)
National Housing Act (June 27, 1934)
Soil Conservation and Domestic Allotment Act (March 27, 1935)
Works Progress Administration (April 1935)
National Labor Relations Act (July 5, 1935)
Motor Carrier Act (August 9, 1935)
Social Security Act (August 14, 1935)
Public Utility Act (August 26, 1935)
Revenue Act (August 30, 1935)
Neutrality Act of 1935 (August 31, 1935)
Neutrality Act of 1936 (February 29, 1936)
Rural Electrification Act (May 20, 1936)
Commodities Exchange Act (June 15, 1936)
Robinson Patman Act (June 19, 1936)
Flood Control Act (June 22, 1936)
Merchant Marine Act (June 29, 1936)
Walsh-Healey Public Contracts Act (June 30, 1936)
Judiciary Reorganization Bill of 1937 (March 9, 1937)

Stalemate to WWII (ending December 7, 1941) -
Agricultural Marketing Agreement (June 3, 1937)
National Cancer Institute Act (August 25, 1937)
Neutrality Acts of 1937 (May 1937)
Miller-Tydings Act (August 17, 1937)
Wheeler-Lea Act (March 21, 1938)
Foreign Agents Registration Act (June 8, 1938)
Natural Gas Act (June 21, 1938)
Civil Aeronautics Act (June 25, 1938)
Fair Labor Standards Act (June 25, 1938)
Federal Food, Drug and Cosmetic Act (June 25, 1938)
Javtis-Wagner-O’Day Act (June 25, 1938)
Hatch Act (August 2, 1939)
Neutrality Act of 1939 (November 4, 1939)
Alien Registration Act (June 28, 1940)
Selctive Training and Service Act (September 16, 1940)
Investment Company Act (August 22, 1940)
Investment Advisers Act (August 22, 1940)
Lend Lease Act (March 11, 1941)

Possible Legislation that I do not know where to put -
Buy America Act
United States V. One Book Called Ulysses (1933)
Flood Control Act (1941?)

http://www.uta.edu/giving/

That is the website for the UTA Development Office. You can call them at 817-272-2584 or go onto their website to pay with a credit card. Should you choose to send a check they would like you to fill out a printable pledge form and send it to:

The University of Texas at Arlington
Annual Giving
Box 19190
Arlington, Texas 76019-0198

You can be as specific as the committees in the UTA Volutneers. The Current Committiees are:

The Big Event
Animals & Environment
Health & Homelessness
Membership
Seniors and Disabilities
Youth and Education

Another thing that can be donated to through the volunteers is the Alternative Breaks Program now run through the advisors

Donate as little or as much as you want. Everything counts.

The UTA Volunteers is one of the biggest joys of my life. For three years I send endless days helping the volunteers promote, plan, and participate in events that served the community. I remember receiving at least three or four 25 hours service awards while I participated. Many people have been touched by the lives of UTA Volunteers as they have done alternative breaks to New Orleans 6 months after Katrina, raised awareness about homeless, or spend time with the elderly.

The UTA Volunteers traces it’s roots back to EX.C.E.L. Campus Activities when they had community projects. Around 2001-2002 they started a program split so that EX.C.E.L. could focus more on the entertainment and academics that the campus was about. The UTA Volunteers has made great strides over the last five to eight years in expanding the program and getting the campus aware of it’s exsistance.

Currently, the program has 6 committees and another program through the advisors. The programs include:

The Big Event
Animals & Environment
Health & Homlessness
Membership
Seniors & Disabilities
Youth & Education
Alternative Winter Breaks

If you want to learn more about the UTA Volunteers go to: http://www.uta.edu/studentaffairs/stuact/volunteers, email: pk@uta.edu,
or call 817-272-2963.

*Warning: This is hearsay, personal research, and various resources put into an informal paper. If you really care about this topic research it on your own. By far this is not complete*

Remember the three main causes I stated for the Great Depression were margin, the house of cards, and the Federal Feserve. Well the responses to these three things were not as dramatic as one would hope; however, that is all that was really needed at the time.

Regarding margin, there was a limit put on of 50% margin is the max that an individual use for an investment. So just to refresh, that is saying you can take out a loan of 50% on top of the value of assets that you have in an account. This reduced the risk, but even with today still being at 50% today more could be done.

The House of Cards was actually bad enough that a law completely bands a forming company provided there are no assets to secure the company. Many finanical firms have multiple units because of the way financial laws were put into place in the 1930s. If I remember at a later time I will go through a more complete financial industry history and tell you how insurance, banks, and investments can now be under the same company. This history explains the current house of cards that is legal.

The Federal Reserve did not have any actions taken against them; however, they lost tremendous power when world economists collided. The New Deal and thoughts from Franklin Delano Roosevelt and Hopkins are often accredited to John Maynard Keynes. A whole school of thought was established by Keynes called Keynesian economics. Keynes believed that the free market economy was a bad model because prices are “sticky” or infelxible. Due to this inflexibility the free market can breakdown from time to time and not be repairable. There are other things that are stated by Keynes that I could discuss in other topics so I will get back to the connection with the New Deal. Many of the ideas that FDR and Hopkins implimented threw money into the lower class because the upper and middle class could dictate wages, product prices, etc. By putting money into the lower class they could get the inflexibility of prices out. By taxing the upper and middle classes you could support the program and get money flowing. The same thing happens with the federal reserve regarding the flows of money, thus a power shift to taxing the rich and giving to the poor.

BTW, the new deal signifies a major change in the political climate for democrats and republicans. This is an era when African Americans communities and lower class switched from republican to democrat.

Another interesting note: The flow of money into people’s pockets raises people’s confidence and when people are confident they buy. They also support the party that made them confident…

*Warning: This is hearsay, personal research, and various resources put into an informal paper. If you really care about this topic research it on your own. By far this is not complete*

While most people see the Great Depression and think that black thursday (October 24, 1929), black monday (October 28, 1929), and black tuesday (October 29, 1929) was the start of it, really the depression was a time boom waiting to go off. Sure, during the crash the market lost 150 points on the dow over 4 days and it dropped as low 50 (300 points or 86% drop) over 5 years from it’s peak of about 350 points (The market did not fully recover until 11-23-1954.). Consider the 2000-2001 market fall only 10 times worse and in a span of 5 days. It is easy to say that this is the cause of the great depression.

Depending on the sources you can see various causes for the great depression including: margin (a historical reason for recessions), a business model built on a “house of cards” (recent example is Enron), or more importantly an inexperienced federal reserve system.

Margin, a form of loan put on various traded instruments and is very risky, many individuals had more than 100% margin on stock investements. In other words, they could have $100 in stock and another $100+ on loan to buy that same stock to make over $200 worth of stock ownership. On a loan there is interest and in must be maintained, same for margin. Should the stock or other investment vehicle go down to $0 you lost at least double your money and the interest on the loan. During the 1920s, there was a long expansion of the US economy and money was being put into the stock market at record paces. If you hear what I just said you will catch there was optimism in the air. Consumer and investor confidence push the market everyday; however, that optimism came to an end October 24, 1929. When that market fell and people were reading the ticker tape through out the day they felt despair and pulled their money out. The next two days were a bounce traditional of a big fall (the market was open on saturday back then). When the market opened monday the word had spread to more people and the decline continued through tuesday. To get back onto topic, margin not only made people broke but so far into debt that they had to claim bankruptcy. When people cannot pay a bank it falls. This allowed for bank runs and further trouble.

A House of Cards in business is when you have a holding company holding another holding company. The deck may have value doen the line or not but people are effectively holding paper. During the market build-up in the 1920s there were many companies that were built in this manor and had absolutely no value at all. When the market crashed and people were trying to liquidate the companies assets to pay shareholders they found out there was nothing or very little. A different form but much the same Enron executives made little companies to make deposits into. The companies were run and owned by the executive; unfortunately, the companies were private expense accounts that funded lavish trips. The parallel being that there is a company with no “real” value.

The federal reserve was created in 1913 and was created to stop consistant depressions and recessions that had pleagued the 19th century. Looking back at historical data you will notice that when a recession occurs that the federal reserve will release more money into the market. The idea is that fresh money will allow for the market to release bad money out of the system and hold up the markets. Well, we now that now, but since they were new at that time they did the opposite and constricted money causing a deeper recession due to mass deflation.

I could have mentioned the republican presidents Coolidge and Hoover, but I really think their inaction was a function of not knowing how bad the situation really was. Since this is a long blog already I will start another two entitled “Responses to the 3 Main Causes of the Great Depression” and “New Deal, Temporary Deal, And Good or Bad Deal?”