Please write a 200 word response to essays number 1-4
BOWERS:
Is our Federal government too big? Why or why not?
Yes. Wasteful spending and all around carelessness have turned a previously lightweight and
efficient government into a bloated bureaucracy. A complicated tax code has created the monster
that is the IRS. Instead of imposing a fair consumption tax that would encourage home
ownership and investment, we have income and property taxes. A simpler more automatic
consumption system would allow for a smaller more effective IRS.
Privatization could greatly trim the size of the U.S. government; allowing workers and investors
to keep more money to then invest and stimulate consistent economic growth. The U.S. Post
Office should gradually be privatized. The slow and comparatively expensive USPS enjoys a
monopoly over delivery of first class mail; allowing them to continually increase the cost of
stamps. The post office already uses private companies like Fed Ex for some of its package
delivery service. It is more cost effective for the post office to use private companies for delivery
rather than paying its own unionized employees to do the same job. If the market were
privatized, the USPS would become a regulatory organization charged with maintaining the
reliability and security of the U.S mail system. Little oversight would actually be needed as
consumer demand would force companies to compete for the opportunity to deliver mail.
There are other areas that could be scaled back or privatized in the federal government. With a
new
president inbound we may see renewed political interest in a more efficient government.
RESPONSE:
I am afraid I have to disagree with this. I do agree that the amount of bureaucracy in
government is choking any potential inefficiency out of government. That does not mean,
however, that all government is bad. Government is inefficient because it is clogged with rules,
regulations, and requirements that make it impossible for employees to do anything with
following step-by-step procedures that were put in place long before technology ended the need
for such steps. Unfortunately, the government has not been updated as technology has been.
However, our nation is a complicated one and it needs a government that is large due to
that fact. For too many years politicians have claimed that “big government” and “taxes” are the
main problems in the U.S. and if those were taken care of then the market would do things
perfectly. That has been the practice these past 8 years and it is, in fact, been proven wrong. The
lack of regulation has nearly destroyed the market as greed was much more powerful than
“common sense” and people let their greed for money overcome their knowledge that at some
time they would need to pay the piper. The market is more efficient than government, but I
would hate to trust the market to assure the safety of my food (as they do in China) and I wish
the FDA would take more action than it has (to keep tainted Chinese made products from
entering our market).
2. SCRIPPS: Chapter 18 questions
3. A flexible exchange rate will not necessarily bring the imports of goods and services into
balance with the exports of good and services. The flexible exchange rate will serve to manage
the balance deficits and surpluses in trades of goods and services with other factors so that in the
end, the balance of payments is equal, “With flexible rates, the overall payments to and receipts
from foreigners must balance” (Gwartney, Stroup, Sobel & Macpherson, 2006, pg 408).
7. Rapidly growing strong economies experience trade deficits because “Trade deficits are
primary a reflection of the inflow of capital” (Gwartney et al., 2006, pg 408). People could get
confused because they assume the term “deficit” means something bad. In speaking about trade
deficits this is not necessarily the case though since the deficit in trade could mean a surplus in
the capital invested. It means that the country has an attractive investment environment. The
trade surpluses of sluggish economies mean that while they are still producing and exporting
items, not as many people are will to invest in the country with capital.
12. A trade surplus is not indicative of a strong healthy economy. The reason is because the
trade deficit may mean that the country has good foreign capital investments. A healthy
economy would be one that has an increasing exchange-rate value for their currency which often
happens with trade deficits, “rapid economic growth and an attractive investment environmentboth of which are generally associated with a strong economy-are major causes of trade (and
current-account) deficits” (Gwartney et al., 2006, pg 408).
References
Gwartney, J.D., Stroup, R.L., Sobel, R.S., & Macpherson, D.A. (2006) Macroeconomics Private
and Public Choice (4th edition). Mason, OH: South-Western Cengage Learning.
RESPONSE
All of these statements are true. However, the flip side of these statements are also true.
A deficit can be a bad thing when it does not come from great capital investment into an
economy but occurs because a nation cannot sell its goods and services to others. This can occur
when a nation has no manufacturing sector or when its goods are too highly priced. Also, a
flexible exchange rate will be good because it can help avoid surpluses and fix an inability to sell
goods overseas. As currency values fluctuate those in other nations will be able to afford goods
made by countries where the currency is less valuable then their own. Unfortunately, too much
of this can then mean that a nation with decreasing currency value may then suffer a decline in
the quality of life of its citizens.
Currency and trade need to have balance. Too many movements in one direction can be
harmful to an economy and sometimes markets do not self correct. Most of the time they do, but
sometimes suppliers and consumers make changes which will later on prevent them from making
quick changes even if they encounter situations that require them to change direction.
3. NASH: What is the current major issue regarding the U.S. dollar in the foreign exchange
market?
The US dollar is decreasing in the foreign exchange market due the simple fact the the economy
is very unstable at this point in time. If you have turned the news on lately, you could not miss
the corporate bailouts and companies that have filed bankrupcy. This is not a pretty time in the
United States economy especially since we have believed we were untouchable and the worlds
leading country. I do believe the dollar will regain its position back but with the crashing
economy, it will be a while until then.
I do not know if it has anything to do with the foreign exchange market but I have always
wondered why currency such as the Euro is the main currency in many countries while the dollar
is only in the US. I wonder if this has anything to do with how other countries view our dollar.
RESPONSE
The dollar has been the world’s major currency because since the end of World War II
the American economy has been the most stable in the world. The United States may have had
recessions and other problems, but the world always had a belief that the United States
government and markets would be able to stand behind the dollar. At the current time, however,
that is not the case. The United States was once the world’s primary lender of money, but it is
now one of the world’s largest borrowers. In outsourcing jobs and manufacturing jobs businesses
did what was good for them. They also stopped making anything in the United States that the
United States could sell. If you don’t sell anything then you don’t have any money to buy
anything, so you need to borrow. That is the position the United States is in now and that is why
its currency is not longer trusted.
When I was young I heard people say that the United States needed to change from a
manufacturing economy to a service economy. I believed that, as I saw manufacturing jobs
disappearing around me. Today, however, it seems the United States has found ways to transfer
its service and manufacturing jobs overseas, from call centers, to lawyers, software developers,
and accountants, all kinds of jobs are leaving the United States. This seems to further help
weaken the economy.
4. Fitzgerald: The current situation regarding the U.S. dollar in the foreign exchange market is
the fact that the value of the dollar is decreasing. This gradual decrease has a lot to do with the
current economic crisis we are in. With companies going bankrupt and getting bought out what
else could we expect. If the value of the dollar continues to decrease there could be serious
consequences for the U.S. economy. Hopefully with the presidential candidate we can get
someone in office who can try and boost our falling economy.
RESPONSE
I agree with all that is said here. However, it took this country almost a decade to get to
this point and while I hope that a new administration can change much of what has gone wrong,
it cannot do so quickly. I also believe that Americans have to realize that we all must now suffer
the consequences for how the country has been run. The average American will not have a
bailout, and will need to slowly and surely work through any problems. A big hindrance to this at
this time is the fact that the near-crash of the United States economy has taken the rest of the
world’s economies with it. Much of Europe and Asia thrived on American tourism and American
spending. Those “glory days” are now over. As Americans face a decreased dollar and economic
difficulties their woes have become those of the entire world. This has lead to near market
failures in EU nations and in Asia, as today’s stock markets indicate.
How long it will take to correct the world’s financial woes is a very large question. There
is also the issue of how much debt the United States owes China. China is a communist nation,
first and foremost. China has made purchasing agreements with all major United States enemies,
such as Hugo Chavez, and terrorist nations to obtain the minerals and energy sources it needs to
continue to develop. If the United States is in a weakened position vis-à-vis China and has
difficulty affording to buy its own minerals and energy sources, it will have a very difficult time
solving these issues.