Kareem's Econ Page

How to Save Money

2007-06-05T05:57:00.000-07:00

Which of the authors' money savings tips can you apply to your own life? Also, why is it important to begin saving money early in life? Explain.

This New York Times article about savings is about how to develope proper savings habbits and why you should start at an early age. The artivles advice on how to develop good saving habbits, such as deverting 10% of your income to savings, or keeping track of all spending and cutting out the fivalous spending. The article then goes into further detail about reasons to save, such as the raising cost of health care. The aurthor also states that if you get used to saving, you will become accostumed to living on a tighter bugdet, thus making retirement easier, which I thought was goog insight. It is important to start saving early because with compund interst it is better to start early and save less than to start late and save a lot. The author gave these figures:

"Bank $250 a month for 40 years in a I.R.A. or a 401(k) and you will receive about $500,000, assuming a 6 percent return. Start at age 45 and you would have to put in $1,078 a month to generate the same amount by age 65."

In closing, it is good to save money. Period.

US Trade Deficit: Getting Better?

2007-05-30T16:04:00.000-07:00

And what about the US dollar - how can a weak dollar actually help the US economy and the trade deficit?

This New York Times article, entitle Rising Exports Putting Dent in Trade Gap. The article was about how American companies are now relying significantly on sales from foreign territories. As a result of this new dependency, the huge trade deficit which as plagued to US may slowly start to decrease. Accord to the article, 500 companies in America are expecting %50 of their sales to be generated outside of the US. Trade deficit is when a country losses more money importing goods and services than it earns through exports. The opposite to this is known as trade surplus, when a country makes more money through exports than it losses through imports. And due to a weak dollar, American goods are also competitive in foreign domains.

The sort of goods that the US exports are cars, such as GM and construction equipment and engines such as those provided by Caterpillar. America is also exporting it's franchises, such as McDonald's and KFC. Infact, there are more KFCs in China than in America.

Taxes - How Does The Government Spend Money?

2007-05-23T05:52:00.000-07:00

Taxes are an inevitable part of life. We know that we are taxed by all levels off government, which include federal, state and city governments. As much as 30% of out income is taken away before it evens reaches ours hands' because of tax. But where is it all going? Well, according to this chart, 30% of the United States' tax dollars goes towards the military! Thats a lot of money dedicated to killing people! Go America! Another 20.3% is dedicated towards health care, which is good to hear. But whats startling is that education receives are measly 3.7% of the governments spending. Thats barely enough to register on the pie chart. Is the destruction of our fellow man 3 times as valuable than the education of the future generations of the world? Apparently so. After searching for a while, I found it difficult to find a breakdown for New York's tax allocation. However, I did manage to find out that the number of full time park employees has fallen, even as the budget for part spending increases. And we all know that the governor has been using eminent domain to seize land in order to build stadiums all over the city.

It seems that at the end of the day, the true nature of government spending will be limited to the brightly colored segments of vague pie charts. It is apparently hard to come across concrete information, such as how much of that 3.7% used for education went towards paying teachers or buying text books or paying for building leases. Or did Joel Cline have throw a party and put it on the tax payers tab? Lets just hope that the people in control of our money have our best interests in mind.

Savings and Debt

2007-05-21T05:57:00.000-07:00

After reading this article, "Couple learn the high price of easy credit", all I have to say is Hoe-ly cow! This family is over $100,000 in debt! I can understand how people fall in to so much debt. With interest rates as high as 32%, if allowed to go out of hand can easily spiral out of control. I believe the reason American's don't save more is because the cost of living is increasing , yet incomes are staying the same. It seems remarkably easy to fall into debt.

Other nations are suffering a similar faith or falling savings rates. From 1990 to 2003, Japan has suffer a sharp decline in it's savings rate. And while the United States's savings rate did climb in the year 2000, it has since fallen off, lower in fact than that of Japan, Britain, France and Italy.

Critique of Gross Domestic Product Podcast

2007-05-16T05:57:00.000-07:00

I am critiquing the podcast of Ronald and Richard. The first thing that struck me was the originality of their podcast. It had a cool beat in the background, and Ronald is kind of yelling like a rap artist. At first the volume was loud and clear, however after a while the voices became inaudible and droning. The images were relevant, but seemed to be just a bunch of GDP graphs, but not having anything to do with what is being said immediately. Richard sounds like a girl. I didn't really learn anything, since we all did the same project. But theirs was by far more interesting than mine, as mine was just about 5 minutes of straight talking. I liked it.

Taxes - How Does The Government Get Money?

2007-05-11T06:17:00.000-07:00

There are many ways for the government, both local and federal to make money, however the most important method is through tax. There are several types of tax: sales tax and income tax.
Income tax, which is designated by the federal government, is tax that is charged to individuals as well as corporate entites. This tax is levied from the idividual's source of income, such as thier wage. Some states also chrge income tax, but not all.

Sales tax is chraged at the point of purchase, or at the time an item is payed for. Sales tax is usually charged by the state. The tax rate for Queens, New York is 8.375% while the tax rate for Saratoga Springs is only 7%.

There is also a third form of tax - property tax. Property tax is a tax payed for the ownership of land. There are three categories that determine the value of a property and therefore the amount of tax that is to be payed: Land, Improvements to Land (immovable man made things), and Personalty (movable man made things). In America, property tax is handled at the county level.

Student Loans - Beware

2007-05-08T06:12:00.000-07:00

We were asked to read a New York Times article called "Top Chef" Dreams, which was basically about how culanry school students pay exhorbitant amounts of money - up to $40,000 for a two year school. Only a fraction on that cost - up to $4000 - is covered by federal money. The rest has to be found through loans. When entering the school, students are told that they will have around a $200 monthly, but end up with a $700 monthly instead.

The reason why these students are falling into so much dept is not because of a lack of jobs in the market, but because these jobs don't pay very well. The average income for a culunary student is just over $9 an hour. At that rate, it would take a student thier entire life to pay off a nonsubsidesed loan.

In order to go to a private school like RIT, I would have to pay $35,000 for all 4 years together, which is insane. And RIT pretty much gaurantees a good paying job. Why would someone pay $45,00 for a 2 year school, that does not allow for good paying jobs when any CUNY or SUNY with an art program probablly also has a culunary program for a fraction of the cost.

Critique of Federal Reserve Podcast

2007-03-19T05:51:00.000-07:00

I choose to review Ashley and Justins federal reserve podcast. I found thier podcast to be very entertaining. Instead of the traditional aproach of just spewing out facts - the approach I myself took, they decided to do a question and answer format, like a student asking her peer for advice. For the most part we had the same information, so unless we were all lied to, their information was factual. They also had many colorful pictures to match thier voices. Some of the pictures were slightly humours when paired with their voices. Overall, I found thier podcast to be very original.

Compound Interest and the Rule of 72

2007-03-15T06:25:00.001-07:00

Compound interest is interest that is calculated not only based on the initial, or principal investment, but also upon the accumulated investment. This is in contrast of regular, or simple interest, which is only based on the initial investment.
The equaltion to calculate compound interest is as follows:

Where:
P = future value
C = initial deposit
r = interest rate (expressed as a fraction: eg. 0.06 for 6%)
n = # of times per year interest in compounded
t = number of years invested

P = C(1+ r/n)nt

I remeber doing someething simular if not the same in SAT Prep class a year or so ago. However, we never talked about the rule of 72. The rule of 72 estimates the amount of time it would take to double an investment.

Insider Trading Scandal - What Happened?

2007-03-15T06:15:00.000-07:00

http://www.themoneytimes.com/articles/20070302/biggest_insider_trading_scandal_in_two_decades_exposed-id-103008.html

On March 1, 2007, a huge insider trading scandal was uncovered. Insider trading is the illegal practice in which persons who are close to a company makes stock trades based on information not released to the public. The estimated total of illegal income due to illegal trading was an estimated $15. According to SEC regulators, this was the largest insider trading scheme in 20 years. Thirteen people traded based on the inside information, including lawyers and influential stock brokers over the course of 5 years.

The accused to advantage of insiders at both organ Stanley and Co. and UBS Securities LLC. to acquire inside information about about stock fluctuations and company acquisitions. However, if this case ends up anything like Martha Stewart's case, they will be sentenced to a couple years in camp, with basic cable and tennis courts. Federal prison is nicer than a lot of people's homes.

Federal Reserve Podcast Text

2007-03-05T06:17:00.000-08:00

This is the information I used in my Federal Reserve Podcast:

The Federal Reserve, also known as the "The Fed" is the central bank of the United States. Its headcouters are in Washinton, DC. The federal reserve serves several roles. It primarly role is to serve as the bank for the federal government aswell as the bank for other banks. The federal regulates interest rates of all the other banks in the country. It is responsble It also regulates the amount of "practional reserve," the portion of its deposits that a bank must maintain to satisfy any demands for withdrawl.

The federal reserve system was created on December 23th, 1913, under Woodrow Wilson's administration as part of the Federal Reserve Act. The federal reserve system includes twelve regeional banks in adition to other member banks, which are all overseen by the Board of Governors. The Board of Governors consists of seven members, who are selected by the president and confirmed by the Senate. The BOG is lead by the chairman and vice chairman. The current chairman is Ben Bernanke, who was aapoted in on Feburary 1, 2006. He was preceeded by Alan Greenspan, who held the office since 1987.

All national banks are required to become members of the federal system. Each member bank is required to

Dow Down 416 points. Why?

2007-03-02T07:38:00.000-08:00

On Tuesdaym February 27, the Dow Jones Industrial Average went down 416 points, or 3.29 percent, the biggest drop since Septermber 11, 2001. Invesors lost an estimated $613 billion on that day. The Dow actually feel to as low as 500 points but recovered to 416. Analysis speclate that the drop was a reaction to the huge market correction in the Chinese stock market. However, many believe that the drop was due to a computer glitch. A glitch prevented kept some trades from being immediately reflected in the index. Dow Jones & Co. blamed the problem on the record volume at the NYSE, and switched to a backup computer.

Despite its immediate servrity, the drop was not significant enough to make the top 20 list of drops since 1950. This drop is nothing in comparison to the stock market crash of 1987. On Black Monday, the Dow Jones lost 22.6% of its value, and in 2002, the market lost 4% of its value on two occations.

I think this is a good opertunity to buy, however that is still a risky move since no one knows if stock values will continue to decrease and when they will stabilize. As I stated earlier, I plan on waiting out the storm until stock values begin to climb again. Since many companies have begin to climb again, I have decided to invest in a few that will likely continue to increase in the long term.

Stock Market Game - 1 - Initial Investment Strategy

2007-03-02T05:52:00.000-08:00

In my economics class, we are playing the StockQuest stock market game. I started playing the day before the big 9% drop in the market - I got lucky. As part of my investment strategy, I've decided to wait out the storm. I could have bought stocks while they were going down in c0st, but it seems like a better idea to wait until stocks begin to clim again, then jump on while they are still relatively low.

My long term investment plan is to invest in companies that release hot new products. For example, Apple is soon to release the next version of OS X, Leopard, which is almost guarantee to increase the value of my stocks. I also plan to invest in stable stocks, like cerial and toilet tissue, that will always be in demand.

Types of Economic Systems

2007-02-28T06:24:00.000-08:00

There are four major types of economic systems in the world today: command, traditional, market and mixed economys.

In a command, or planned economic system, the government decides what is producted, who produces it and who recieves it. Althought the Soviet Union was supposedly had a communist economy, it was actually a command economy.

In contrast, in a market or free enterprise economy, the production and distribution of goods is dtermined by bussinesses and consumers. In a market economy, there is little to no government intervention.

A traditional economy is a system i which a person's occupation is determined by he occupation of thier predecesors. Traditional ecnomoys are largely restricted to rural or underdeveloped areas of nations.

A mixed economy is a mix of several economic systems. Mixed economys usually contain a mix of market and command systems, meaning a mix of private and state operated bussinesses.

The differnce between a communist and socialist state is that the goal of a communism is to have a stateless society, meaning no government, whereas a socialist society everything is the posetion of the government.

Opportunity Cost

2007-02-28T06:07:00.000-08:00

Opportunity cost, as defined by my two economics teachers, is what one has to give up when making decision - a trade off, in essence. An example is that if I buy a new video game , I will not be able to buy my mother a birthday gift...I bought the game. Another, not so economic example is that if I dedicate my time to running, I will be unable to join the fencing club. The U.S government has to make trade offs all the time. Should they further the "War on Terror" by buying more, bigger weapons. Or should they invest in building roads.