Finance Weekly Updates

On Recessions and Depressions

By Staff Editor | July 20, 2018

What is the difference between a depression and a recession, and which are we experiencing now? Until the Great Depression, and for some time after, any downturn in economic activity was known as a depression. But in the late 20th century, economists and politicians were reluctant to alarm the public by using that loaded term, and so they coined the alternative, “recession” to denote a relatively minor economic downturn. Some have attempted to give formal definitions, based on the extent of shrinkage or the duration of the negative period. But the best definition remains the somewhat humorous one: “A recession is when other people lose their jobs. A depression is when you lose yours.” To this we may add, for the current recession: “A recession is when other people lose their homes, a recession is when you lose yours.”

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The Year of the Flat Screen

By Staff Editor | July 17, 2018

Even with an atmosphere of restraint and a renewed commitment to fiscal responsibility, this may be the year when more Americans than ever get flat-screen TVs and computer monitors. It looks at though manufacturers have prepared too many for the holiday season, and will be forced to sell at rock-bottom prices. News of a federal investigation  into price-fixing schemes between manufacturers also portends an imminent downturn in prices. We are already witnessing heavily reduced pricing in the context of holiday sales, below the traditional $10/inch barrier, and consumers are unlikely to accept a return to old prices once they have experienced the new lows.

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British Real-Estate Crisis Looms

By Staff Editor | July 14, 2018

If you’ve been to the UK in the last couple years, you know how expensive land is there. The country is small, populous and developed, all factors that contribute to legitimate rise in land cost. But lately prices seem to have climbed beyond reasonable levels. Analysts have observed that there is not currently enough wealth in all of England to cover the mortgage costs held by the citizenry. This includes bank assets! Were homeowners to experience a “call”, there would be a huge shortfall and many would lose their homes, to banks who would then be unable to sell them for anywhere near their supposed value. The banks, in turn, would default on their obligations to foreign investors.

This alarming situation could lead England the way of Iceland – a sudden and harsh awakening to national insolvency.

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Will Social Security be There For Us?

By Staff Editor | July 11, 2018

One of the biggest challenges facing the Obama administration is restoring the viability of the US Social Security system. We don’t know exactly when it will hit, but for years there have been whispers of an impending Social Security crash. As the baby boomer generation hits retirement, they may strain the system beyond its breaking point. Obviously a weak economy in which the younger generation has trouble earning cannot help this situation.

Americans are looking to Obama and his incoming cabinet to find a solution to this potentially disastrous issue. Should Americans be unable to receive Social Security, their faith in their govenrment will be seriously weakened, and consequences will run far deeper than the immediate problem of supporting the elderly.

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Some Retailers Benefit from Crisis

By Staff Editor | July 8, 2018

While most retailers find their profits shrinking, there have been some big winners this holiday season. Most notably, those retailers known to offer low prices and affordable value have found their market share growing, at the expense of luxury and elite vendors. Walmart, for instance, reported that it has seen an increas in its sale of flat screen TV’s, one of the most desired and expensive holiday gifts.

More shoppers are also turning to non-traditional venues such as Ebay and Craig’s List to find merchandise at recession prices. We may see a realignment in the retail space in which luxury brands, which had experienced growth for many years, may be dethroned by value brands in the coming period. We will need to wait and see whether manufacturers and retailers can stay solvent selling goods at the razor-thin profit margins such venues provide.

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