Scary Good Deals!

Perhaps partly due to an unhealthy obsession and partly due to an empty wallet, Columbia students hoarded Nutella. This was their way of increasing their food supply without spending money.

Perhaps partly due to an unhealthy obsession and partly due to a strict budget, Columbia students hoarded Nutella when the college began providing the popular spread at breakfasts. This was their solution to a prevalent college problem of getting edible food without going broke.

In the eyes of nearly every college student, finding something to eat is tantamount to passing classes. In the beginning, everyone aspires to combat freshman fifteen by hitting the gym everyday (free at Queens College for students and faculty!) and eating healthily. Over time, these quixotic goals transform into a more idealistic one of trying to incorporate a salad into a daily diet of the artery clogging ramen noodles. College students buy the notoriously unhealthy food because of their strict budgets. By paying for their tuition, they do not have much leftover to spend on food. Therefore, the cheapest option is the only option. The cost of snacks in particular can eat away (pun intended!) at students’ wallets, especially in cases where convenience is a major factor. Fortunately, with Halloween right around the corner, you have the opportunity to replenish your shelves, which are by now undoubtedly devoid of any substance that could satisfy your sweet tooth when you are on the go or are in a time of need.

No matter how old you are, the contents of a vending machine are always tempting. Since some of us don't have the willpower to go on a diet so as to deny ourselves from eating such foods, a better alternative is to buy them at a cheaper price.

No matter how old you are, the contents of a vending machine are always tempting. Since some of us don’t have the willpower to go on a diet so as to deny ourselves from eating such foods, a better alternative is to buy them at a cheaper price.

Right now, there are many opportunities during the day in which you can waste your hard earned money by being completely ripped off. The vending machine is by the far the biggest, most nefarious trap. Ubiquitous on campus, it provides the ultimate temptation by enticing those who are contemplating eating something with a wide selection of sweet and satisfying snacks. Most people justify caving in and buying something by rationalizing that it is only a dollar. If you indeed want to save money, then this logic is completely skewed. Hearing people say this truly incites my anger. By looking at the big picture, you can get a better sense of how much you are really spending and wasting. While it costs $1 for a Twix, you could buy a whole box of Twix, or a bag of the bite size kind, for under $4. Not only would you proportionally spend less, but it would also last you longer. (Put in mathematical terms: buying 12 Twix bars from the vending machine would cost $12, whereas the same amount could be bought at Shoprite for 66% less!) Similarly, in the cafeteria, chips are sold at nearly double the price of any regular supermarket.

Despite knowing that they are getting ripped off, people still buy from both places. At first it boggled my mind: how could people be so blind to the brazenly inflated prices? As I contemplated the matter more, I realized that the cafeteria and vending machines both offer something that, at that very moment, no supermarket can provide: convenience. These goods, with their higher prices, are easily attainable since they are right there to be purchased. For example, a student rushing to class needs to simply drop a dollar on the counter and then run off with the bag of chips; there is no need to walk to the car, drive five minutes, go to the snacks aisle, and then wait at the checkout counter. Ultimately, the profit made by selling these items is equal to what buyers deem to be the cost of convenience.

Impulse buys are those small goods located next to the check-out counter. Especially if they are with children, shoppers will impulsively reach for the item because it is only around a buck (and it will silence the incessant, annoying pleas). Impulse buys test the willpower of the shopper, to see if they will yield to one last, ostensibly insignificant purchase. My advice is, as difficult as it might be, to avoid such tempting items. The benefit you gain from them will ultimately be less than the price you pay.

Impulse buys are those small goods located next to the check-out counter.  Shoppers will impulsively reach for these items, especially if  they are with their children, because they are only around a buck each (and doing so will silence the incessant, annoying pleas). Impulse buys test the willpower of all shoppers, to see if they will yield to one last, “financially insignificant” purchase. My advice is, as difficult as it might be, to avoid such tempting items. The benefit you gain from them will ultimately be less than how much you initially think they are worth.

While most people value convenience, I value getting a good deal; if you are on a strict budget, you should too. (Of course, only to a certain extent: driving 30 miles to another store to buy milk that is 50 cents cheaper is actually counter productive because you end up spending more due to the cost of using more gas!) Never buy on impulse; instead, you should buy when prices are advantageous to you, the customer. During specific times in the year, items associated with certain time periods go on sale in their respective seasons. For example, around Halloween time, candy is sold for a discounted price.  There is a surplus of candy in the available inventory due to the anticipation of a higher demand. Supermarkets lower the price so that people keep buying, in order to keep replenishing the shelves.

Just because a top businessman thinks of an idea does not mean that it is good-or, better yet, legal! Bernie Madoff used a Ponzi Scheme to earn money at the expense of many others, which is both ethically wrong and federally a crime.  Stocking up on goods when prices are lower is a creative, legal, and, in my opinion, a commendable way of saving money!

Just because a top businessman thinks of a way to make money does not mean that it is a good idea. Bernie Madoff used a Ponzi Scheme to earn money at the expense of many others, an act that is both ethically wrong and entirely illegal. Stocking up on goods when they are on sale is a creative, legal, and, in my opinion, commendable way of saving money!

Sales are directed toward children, but there is no reason why you cannot take advantage of the deals, too. After all, creativity is the how professionals on Wall Street makes their millions; if you can find a way to save money both honestly and legally, go for it! (Maybe you could also teach some of the crooks who promote themselves as legitimate businessmen how to do so.) By stocking up at a discount, you can always have a sweet treat to carry around.  That way, you can avoid having to pay the astronomical prices that the vending machine charges for as long as your cache lasts. Buying these snacks now is essentially an investment for the future. Think about how much you can save by not buying these expensive options; those mere dollars add up!

In general, an important way of saving money is by first looking at goods and their prices, and then considering the long-term benefits of stocking up. Seeing Halloween sweets on sale might appear to be a nice holiday gesture on the surface. However, if you think on a deeper, economic level, you can figure that investing at such a cheap price will decrease your food bill for the next few months. Now that you know of this financial tip, have fun getting in touch with your inner child!

 

Published in: on October 31, 2013 at 2:38 am Comments (0)
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Midterm Madness

I have yet to ever encounter a student studying for midterms who appears this enthused and uptimistic. Then again, this image seems to be taken in a vacuum, so anything's possible.

I have yet to ever encounter a student studying for midterms who appears this enthusiastic and optimistic. Then again, this image seems to be taken in a vacuum, so anything’s possible.

It feels like boulders have been lifted off of my shoulders (rhyme intentional) now that I’ve completed my midterms. Do you know that feeling? Oh right. For many of you unfortunate souls, midterms will continue this coming week. Or, for some, midterms are just beginning and for those of you, I have the utmost sympathy. It is so much better to just get them out of the way!

Besides for coffee, energy drinks are now embibed by sleep deprived students who need to study more. The energy drink has become an important part of the beverage market over the years, with skyrocketing profits , despite the potential health risks.

Besides for coffee, energy drinks are now imbibed by sleep deprived students who need to study more. The energy drink has become an important part of the beverage market over the years, with skyrocketing profits, despite the potential health risks.

It is an extremely stressful period in which students exploit energy drinks and coffee so as to counter their biological inclination to have a decent amount of sleep. In economics, an important principle is that there is a finite amount of resources, and it is our goal to allocate them efficiently. This idea is most relevant when it comes to midterms week, in which one must decide how to best utilize the 24 hours of the day. There is simply not enough time that allows for both a decent amount of sleep and studying. There is always a trade-off: the more you sleep, the less you study, and vise versa. (For those of you who are math majors, it is an inverse relationship.) Queens College provides free peer tutoring for those who need help in various subjects. I am always a fan of this particular four letter F word, but it is important to note the system’s positives and negatives.

The presence of a free student tutor at one’s disposal is a boon for a struggling student. Tutors often charge arbitrary amounts for their services; finding one that is free is virtually unheard of. The tutor, also a Queens College student, may also be familiar with the professor and his/her teaching and testing methods. In that regard, the service will not just help you grasp the concepts of the course material, but will also enable you to prepare for the test.  Queens College peer tutoring thus gives students a better understanding of the material specifically within the context of that particular course, a service that almost no private tutor can provide.

Now why would people choose to be peer tutors at Queens College when they could undoubtedly make more money if they disseminated their tutelage elsewhere?  Thought they might be knowledgeable in the subject, they might not be experienced enough to be a paid one. Instead, they could develop their teaching skills as well as reinforce their knowledge in this program. The peer tutoring thereby serves as a stepping-stone for greater pay and more exposure. After all, potential clients want to hear about your success stories; the more people who do well after consulting you, the more qualified others deem you to be.

How do you make a Queens College brochure with an image as picturesque as this one even more attractive to potential students? By adding in the details about the high achievements of the students, namely in stellar GPA's.

How do you make a Queens College brochure with an image as picturesque as this one even more attractive to potential students? By adding in the details about the high achievements of the students, namely in stellar GPA’s.

While on the surface it is obvious how students and tutors gain from peer tutoring, Queens College in fact benefits, too. By instituting this program, the college can boast of another amenity it provides, one that especially reaches out to underprivileged students. After all, many people attend Queens College because of its affordability; therefore, they would certainly not have the financial means to hire a private tutor. Additionally, the result of tutoring is an increase in the average test score. Queens College’s reputation rises if its student body appears to be improving scholastically. The college would consequently get more federal grants and monetary donations from alumni and wealthy private citizens who would come to believe that there is much potential for academic greatness in our institution.

Peer tutoring has many positives, but there are also some drawbacks. Free does not entail quality. By not paying, you are not guaranteed to have a helpful tutor. The help they offer might be mediocre at best; after all, you have no way of knowing their credentials or the experiences of others students that they tutored. Furthermore, money plays an important role in encouraging a tutor to prepare and organize a lesson plan. Psychologically, a financial reward serves as an incentive to put in more effort; otherwise, if they do not live up to the person’s expectations, they could be fired. Long-term commitments can result from a paid gig, while peer tutoring at Queens College can be done with various people. It is therefore difficult to foster a relationship with those who peer tutor or for them to pinpoint your strengths and weaknesses.

Racking up good gra1des will help you in the future

Racking up good grades will help you in the future, whether it be in your applications to graduate or medical schools, or simply bragging to your grandchildren about how smart you are!

Whatever the case may be, it is important to take advantage of any and all the resources you have to do well on midterms. If you think tutoring will help you, consult either a paid or free tutor. At the end of the day, graduate schools only see your final grades-there is no asterisk that notes the fact that you received help.

Published in: on October 27, 2013 at 11:33 pm Comments (1)

Main Street Woes

Google maps street view of a busy intersection on Main Street. Already this image is obsolete, as three of the stores on the right are out of business.

A Google maps street view of a busy intersection on Main Street. Already this image is obsolete, as three of the stores on the right are out of business.

Lately, as I have been walking to and from school on Main Street, I noticed something curious: more and more stores have “for rent” signs. First it was a fruit and vegetable store, then a bakery, then a mall supermarket. I felt a wave of nostalgia, remembering the times when I got stuck in the pouring rain and sought refuge from the downpour in some of these stores; I had to engage in awkward banter with the owners in order to pretend as if I was not just exploiting their roofed areas, but rather genuinely interested in hearing their life stories.

The more I thought about the matter, the more concerned I grew. In limiting the variety on Main Street, the market would contract. With fewer options and fewer places to shop, people would be forced to buy goods at higher prices. In fact, a shop selling certain items that no one else does would have a monopoly (exclusive control over the supply of a good). As you can imagine, the store could then boost the price because it is not competing with anyone else. The dearth of stores is an ominous sign for the Kew Garden Hills/Flushing economy.

Darwin was referring to birds' beaks when he discussed survival of the fittest. However, this term applies to other areas besides for biology, such as capitalism.

Darwin was referring to birds’ beaks when he discussed survival of the fittest. However, this term applies to other areas besides for biology, such as capitalism.

I have been told that the rent prices on Main Street are astronomical. Thus, the revenue a small store earns can barely cover overhead expenses. A business’s demise is imminent if it cannot earn a profit. Additionally, it is a sad reality in a capitalistic market that some stores will thrive while others sink. The competition may prove to be too much for a store, in that it loses revenue from a dwindling customer base. Put in Darwinian terms, it is survival of the fittest.

Seeing stores that one grew up with suddenly go out of business is sad, but on a deeper, economic level, it is serious and potentially dangerous. Having many sole proprietorships (companies owned by one individual) brings in a stream of revenue. The area becomes better off because the owners provide jobs to people by hiring necessary staff, and then gain revenue as people buy the goods and services that they need. A portion of the revenue obviously goes to the government in the form of taxes. Thus, all three parties-buyers, sellers, and the government-are better off. (Rarely does this ever happen, where all the parties benefit!) The standard of living consequently rises, and people choose to flock to Queens.

Tumbleweeds in the middle of a dynamic place like Queens? Never! Although, it sometimes feels a little empty with the lack of new stores replacing the old ones.

Tumbleweeds in the middle of a dynamic place like Queens? Never! Although, it sometimes feels a little empty with the lack of new stores replacing the old ones.

With so many empty stores, however, Main Street will start to look like a ghost town. There is less for people to buy and consequently, less money pours in. The worst case scenario is that with so many abandoned shops, crime will increase. An empty place almost begs for drug dealers and gang members to come inside and use the space for their insidious activities.

In my home state of New Jersey, we have a stretch similar to Main Street, called Cedar Lane. It too has a variety of stores; it even offers a space for people to sit and relax. While Main Street has a problem of vacancies, here we have the problem of corporate takeovers. Our mayor had said that he would rather there be more sole proprietorships in order to benefit the people first. Unfortunately, there are now two CVS’s, and a Walgreens is about

The businesses shown are all privately owned, and contribute to the quaint feel for which Cedar Lane is renowned.

The businesses shown are all privately owned, and contribute to the quaint feel for which Cedar Lane is renowned.

to open up, despite the fact that there are already two Walgreens nearby. Not only does this limit the variety of stores, but it also cripples the flow of traffic because a double yellow line prevents drivers from entering from both directions. The beauty of Cedar Lane used to be that it provided everything and was therefore a source of convenience for shoppers. It also fostered a sense of entrepreneurialism for proprietors as well as unity within the community. Now unfortunately, with the emergence of corporate stores, people do not get as much as variety as they once did. They lose the intimacy of the customer-owner bond that manifests itself most visibly in sole proprietorships. What was once a place that provided a relaxed shopping experience will now become an area marked by strict business transactions.

Vital streets such as Main Street and Cedar Lane both reflect their respective areas’ communities, culturally and economically. Growth and innovation are crucial for the inhabitants as well as the longevity of the stores. People should not be afraid to harness their entrepreneurial side and start businesses or, at the very least, support up and coming ones-for their good, the city’s good, and ultimately, the future’s good.

Published in: on October 20, 2013 at 1:13 am Comments (1)

Me in the Finance World: An Observation after Seeing it Live for Myself

What comes up on a map image when one Googles "banks in Manhattan". Manhattan is densely populated with a variety of financial institutions and I was therefore overwelmed, having no clue as to where to start my search for a potential interviewee who both fit the bill and had time to see me.

What comes up on a map image when one Googles “banks in Manhattan”. Manhattan is densely populated with a variety of financial institutions and I was therefore overwhelmed, having no clue as to where to start my search for a potential interviewee who both fit the bill and had time to see me.

In one of my classes for my minor of BALA (Business and Liberal Arts), we are required to conduct an interview with a person in a position that we aspire to hold. The project entails much more than simply interviewing and it is a major to-do. I was stressed, not about the five page reflective essay about what I gleaned from the experience, but at the prospect of finding someone who would be willing to be interviewed by me, an unimpressive sophomore from a CUNY school; after all, people in this field are stereotypically arrogant. Many hours of Google research later, I sent out email requests to a multitude of people in finance related positions who worked in NYC (which, as you can imagine, is a lot. Finding their names was the easy part; tracking down their emails and contact information, on the other hand, was a nightmare.) After much waiting, I eventually received a reply from two individuals at vastly different institutions that for privacy purposes I will from here on out refer to as X and Y. X is a prestigious financial firm located amidst other wealthy institutions. Y is at a less central address and is a not-for-profit (exactly what it sounds like-they do not make a profit. A profit is the amount left over after you subtract expenses from revenue.)

While the assignment required one interview, I decided to conduct an interview with both people since they would each provide unique insights. In addition to being exhausted by the end of the week from commuting from Queens to Manhattan and back two days in a row after my classes, I came out being more informed about the diverse nature that exists in the finance world.

I know it's not professional, but I could not resist taking a selfie before my interview with X. In my defense, I almost never take such painfully narcissitic photographs. Also, I thought that it would give this blog a personal touch. Dressed to the nines, I was both excited and nervous for this special opportunity.

I know it’s not professional, but I could not resist taking a selfie before my interview with X. In my defense, I almost never take such painfully narcissistic photographs. Also, I thought that it would give this blog a personal touch. Dressed to the nines, I was both excited and nervous for this special opportunity.

Coming to X, I was extremely nervous. While I do not wish to publicly say what company it was, I will say that it was a renowned institution with someone whose professional opinion is often sought by the media. I was told to dress smartly, and that I did: I donned a sweater shirt and black pencil skirt (both from Banana Republic, together costing no more than $20), a classic blazer (it was rather pricy, but I have worn it so many times that it was a worthwhile investment) and of course a pair of fancy heels. I thought I looked like a million bucks! When I looked around, I was both relieved and surprised that I fit right in. Everyone else was wearing essentially identical suits, each with a unique silk tie as a minute reflection of his personality.

I say this because for the most part, there were only men walking in and out of the building. I was appalled. For all that is done to prevent a certain field from being dominated by one gender, the ratio I calculated of women to men was around 1:8.  Whenever I read the business section of the newspaper, the person discussed is almost always a male. I nonetheless had a glimmer of hope when I came to the building that the reality would be the opposite- that women would have an equally important role.  Instead, as the revolving door turned, more and more men walked in and out, preparing for a meeting or taking a quick smoking break.

The amount of smokers around the building was astronomical. All the current attempts to rid smoking from society are surely negated by the incessant puffing I witnessed.  The instant they left the building, they lit up their cigarettes. While I understand the unfortunate reality that some smokers are so addicted that they physically cannot stop, I find it rather ironic that financial advisors who help clients save and earn money are wasting their own on something that is so detrimental to their health.

Those who were not smoking were frantically checking their phones. At first I thought maybe they were playing an intense game of Candy Crush, but I later realized that many of them were still attending to business matters. As I soon learned from my interview, in prestigious financial institutions, one is always on the job.

The best way to depict the way opportunity costs work is through PPF's-production possibility frontiers. The Y axis represents the quantity of one good, the X axis represents the quantity of another good. I won't get into the nitty-gritty, but here is the basic thing to note: Whether on a linear graph or a curved graph, as Y gets smaller, X gets bigger (called an inverse relationship). If you think about it without looking at the graph, it makes sense: as you have less of one thing, you can have more of another. While we often apply this concept to tangible goods, you can apply it here, too: the more work you have, the less leisure time you have. The curved graph is special because it shows a relationship where the more you increase one good, you exponentially lose more of another. For example: in a linear graph, every additional hour you spend at work means losing exactly one hour with your family. In a curved graph, one hour of work means one less hour with the family; another hour of the former means two hours less of the latter.

The best way to depict the way opportunity costs work is through PPF’s-production possibility frontiers. The Y axis represents the quantity of one good, the X axis represents the quantity of another good. I won’t get into the nitty-gritty, but here is the basic thing to note: Whether on a linear graph or a curved graph, as Y gets smaller, X gets bigger (called an inverse relationship). If you think about it without looking at the graph, it makes sense: as you have less of one thing, you can have more of another. While we often apply this concept to tangible goods, you can apply it here, too: the more work you have, the less leisure time you have. The curved graph is special because it shows a relationship where the more you increase one good, you exponentially lose more of another. For example: in a linear graph, every additional hour you spend at work means losing exactly one hour with your family. In a curved graph, one hour of work means one less hour with the family; another hour of the former means two hours less of the latter.

Work at one of these high ranking financial firms entails a tremendous amount of diligence and drive. It is a high pressure environment, and unless you are truly passionate about your work and motivated to work yourself to the bone, you will not succeed. It is a cutthroat environment that is not meant for the weak of heart. If you do not put in 110%, someone else will put in 115% and beat you; the finance field thus functions as a microcosm for a dog eat dog world.  The financial benefits are incredible, but receiving them ultimately comes at a price. In economics, we call this an opportunity cost– what will you give up in order to receive something else. When working in this pressurized work environment, you may get a terrific paycheck, but at a cost of not spending any time with your loved ones. Sacrifice and compromising your personal life is inherently part of this  type of work. The person I interviewed, through his personal experiences and opinions, truly shed light on the significant highlights and lowlights that exist for those who work in the top firms.

For this interview, I donned a more casual outfit that showed a bit of creativity, instead of a boring black suit . The outfit fit the personality of the company to a T. As you can see from this selfie (I swear, my last one ever!) I was noticeably less nervous for this interview because the atmosphere was significantly less tense. Nonetheless, both were interviews were at institutions that were prestigious in their own right, and I learned a tremendous amount from both.

For this interview, I donned a more casual outfit that showed a bit of creativity, instead of a boring black suit. The outfit fit the personality of the company to a T. As you can see from this selfie (I swear, my last one ever!) I was noticeably less nervous for this interview because the atmosphere was significantly less tense. Nonetheless, both interviews were at institutions that were prestigious in their own right, and I learned a tremendous amount from both.

What I witnessed at Y, the not-for-profit, was so different than X that I had to stifle a laugh. The ambience in the office space of this company was extremely modern and casual. Unlike the sterile, serious environment in X, Y was filled with bright colors in addition to workers who all clearly had their own unique identity; no one was wearing formal business attire, but rather garb that was interesting and creative. To call this area an office space is almost a misnomer because such a word connotes serious, silent working. Here, employees were indeed working, but in a setting that did not feel nearly as tense as in X. The people were friendly, an important quality considering the importance of teamwork for many tasks in Y; in X, independence and getting the job done on one’s own was of the utmost importance. Overall, the mood was not nearly as stressful as that in X. Y was also an important company with goals to achieve and deadlines to meet, but it employed a vastly different corporate culture than that of X.

My original goal was just to glean insights about the finance world from one interview. But by conducting not one, but two interviews at institutions that are polar opposites, I thoroughly achieved the mission of this project. People may attribute certain stereotypes to the finance field, but in reality, it is extremely broad. It is possible to work in a cutthroat environment where all of the work must be done on your own. Long hours and no fun, in the end, are justified by two types of people: those who are genuinely passionate about finance, and those who value rewarding paychecks above everything else (I interviewed the former type, which made for a terrific experience). On the other hand, it is possible to be involved with finance while still having a relatively stress-free time. It might entail a smaller paycheck, but peace of mind for many outweighs the debilitating stress that can come with huge companies. A place like Y also allows for learning and training-the person who I interviewed had majored in political science and communications (so she had no formal education in business). In X , however, you are thrown into the water and must fend for yourself. It is therefore crucial to know yourself and your limits. When you think of people who work in this field, know that in fact a broad range of people can work in finance.

 

Published in: on October 13, 2013 at 8:06 am Comments (1)
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Operation: Government. SHUTDOWN.

Sorry for not posting in a while. I have been inundated with work-I’m sure you all can relate. All of you, that is, except Congress. Since October 1, there has been a government shutdown. Its cause is rather complex, and I am humble enough to admit that many of the details go way past me. Basically, what happened is as follows: The House of Representatives has the ‘power of the purse’, meaning that it has the ability to fund laws. Because it is comprised of a majority of Republicans, the House of Representatives is overall strongly opposed to The Affordable Care Act/ Obamacare. (They are exactly the same thing!) They wrote a proposal with a list of laws to be funded, but conspicuously excluded

There is a government shutdown because in the end, neither the Democrats (symbolized by donkeys) nor the Republicans (symbolized by elephants) were willing to compromise and reach an agreement. This cartoon, by depicting animals fighting, emphasizes the ridiculous nature of the chaos in Congress. Sadly, the real fighting that is going on is not much different.

There is a government shutdown because in the end, neither the Democrats (symbolized by donkeys) nor the Republicans (symbolized by elephants) were willing to compromise and reach an agreement. This cartoon, by depicting animals fighting, emphasizes the ridiculous nature of the chaos in Congress. Sadly, the real fighting that is going on is not much different.

Obamacare. They sent this proposal to the Senate for passage, but the Senate, comprised of a majority of Democrats who support Obamacare, swiftly rejected it, saying that only a proposal including funding for Obamacare would be passed. The House of Representatives refused to do so, and the Senate insisted on standing their ground. (I think this is the perfect way of saying what happened by not choosing sides, and instead placing an equal amount of guilt on both parties). Such an impasse resulted in a government shutdown, a term that I personally think is ominous and evokes images of Armageddon- although with the way House of Representatives and the Senate are battling it out, this metaphor is not so far off. While Americans had a certain F-word on their tongues upon witnessing Congressional incompetency at its finest, the federal government had a different F-word on its mind: furloughs (a nice word for a leave of absence or being laid off for a period of time).

Thankfully, the federal government is smart enough to realize that the Secret Service is essential to the existence of the United States. It is more controversial, however, whether the jobs deemed non-essential are in fact not necessary.

Thankfully, the federal government is smart enough to realize that the Secret Service is essential to the existence of the United States. It is more controversial, however, whether the jobs deemed non-essential are in fact not necessary.

Now that you know why it happened, it is important to understand what this government shutdown entails. Technically, it is considered a partial government shutdown because only those considered non-essential are not working, such as NASA TV employees and food inspectors. Those that are considered essential, such as the Secret Service, are (fortunately) still working. Despite not being a full-fledged shutdown, the number of people who are not working is staggering: 800,000 people who work at federally owned and operated locations are suddenly without a job. Having so many people stop working on such short notice is sure to impact America’s economy.

Economists differ as to what the ultimate economic ramifications of the shutdown will be. Some say that the impact will barely be noticeable. They look back to the shutdown of 1995 as proof, when the economy improved in what was historically the longest one, at 21 days. Others claim that it will have a negative impact, with the results of a decrease in economic growth during the shutdown of 1976 to bolster their arguments. No matter how much support they can gather for their respective opinions, their conclusions will still be rather tenuous because every government shutdown is different due to unique circumstances.

My personal opinion is that the latter will occur. In essence, this is a sudden wave of unemployment, just with a more professional sounding name. Those furloughed had no way of

Over the past few decades, the level of the GDP (gross domestic product)-an indicator of how well the overall economy has been doing-has been rising. I anticipate that once the GDP for this year is calculated, there will be a slight drop in this graph because less spending will occur due to the government shutdown.

Over the past few decades, the level of the GDP (gross domestic product)-an indicator of how well the overall economy has been doing-has been rising. I anticipate that once the GDP for this year is calculated, there will be a slight drop in this graph because less spending will occur due to the government shutdown.

predicting or planning this outcome. The scariest part is that they have no way of knowing how long this will last. When will they start to earn income? By looking at the big picture, it is easy to see how a downturn in the economy seems inevitable. Suddenly, 800,000 people are spending less money in the market because they are making less money; the longer the shutdown, the longer they will be spending more conservatively. The fact that nearly a million people are pouring less money into the economy therefore leads me to believe that if they do not start working soon, there will be negative effects that are severe and long lasting. Especially with our fragile economy, still healing from wounds inflicted by the Great Recession (the name for the financial crash of 2007), we cannot afford any more damage.

What bothers me even more than the fact that there are so many people not earning any income is that congressman are. All of the people responsible for the shutdown and the subsequent furloughs of federal officials are constitutionally entitled to get paid. That’s right, check Amendment #27: “No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.”  This means that their salary cannot be altered now, despite the fact that they are not doing anything, except perhaps causing economic issues for us in the future. I find it troubling that while Congressmen are also employed

There are a select few in Congress who promise to refuse or donate their paychecks from the time of the Government Shutdown. Most, however, make no mention of such altruism, and are instead keeping the income-without a hint of a guilty conscience- while nearly a million other people do not get paid.

There are a select few in Congress who promise to refuse or donate their paychecks from the time of the Government Shutdown. Most, however, make no mention of such altruism, and are instead keeping the income-without a hint of a guilty conscience- while nearly a million other people do not get paid.

elsewhere (for many, being a congressman is a second job), those that are federally employed do not have the leisure to fall back on another job. Their livelihood is dependent on their employment by the federal government. It is not only unfair that the wrong people are getting paid, but also inefficient. The government cannot afford to waste money, and yet here it is, paying those who are the root of the whole problem.

 

And yet the problems for the United States federal government do not end there. No, they are just beginning. On October 17, the government is set to reach the debt ceiling. What does that mean? The debt ceiling is a limit imposed by Congress on the absolute maximum amount of debt the United States can legally acquire, and no more (unless, of course, the amount is raised). And yet, as America spends more and more, it accumulates more debt. Once the amount exceeds the debt, the government will legally be forced to default on its loans-meaning that it cannot pay them back. It is important to note that the American government is so far behind on paying back its debts, mostly to China, that the default is not actually about paying the loan off on time-but rather paying back the interest on the loan (You don’t think other countries to just lend us money and not expect anything in return, did you?) If America cannot pay back the money, America’s future will not look good. People will lose confidence in the American economy, causing the Stock Market to crash, even more sharply than in 2007. Also, people would be hesitant to invest in the future, causing America to lose out on the opportunity to conduct business with wealthy investors.

There will be another heated debate as the debt ceiling limit looms closer and closer. My hope is that the Democrats and Republicans act more maturely when dealing with that issue, because the possible negative ramifications are severe.

There will be another heated debate as the debt ceiling limit looms closer and closer. My hope is that the Democrats and Republicans act more maturely when dealing with that issue, because the possible negative ramifications are severe.

I don’t want to scare you, but it is important to know about the government shutdown and the looming debt ceiling. Both play a crucial role in the business world and have a major impact globally. I hope this crash course gave you a solid foundation in what has been happening over the last week, especially if any of you have felt overwhelmed by the sudden deluge of reporting that was sometimes difficult to comprehend.

Published in: on October 6, 2013 at 4:16 pm Comments (3)
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