Economic courses used to be widely available in high schools. Although, advance placement (AP) economic courses are becoming more common in high schools. AP courses are year long courses that a high school student takes in order to be placed in a higher class in the subject of the class in college given that the students score is high enough. AP test are scored from 1 to 5 with 5 being the highest score and 1 being the lowest. Typically, a state school with require a score of at least 3 to be placed higher while more reputable universities may require a score of 4 or 5. Aside from these AP courses, some students have the opportunity to take an economics class as a college credit plus class either through their high school, online through a college, or on a college campus. College credit plus is a program that allows high school students to take college level courses to earn college while their still in high school. Of course, a student doing this would still take high school classes and possibly participate in extra-curricular activities. I participated in college credit plus when I was in high school by taking classes online through a university and I earned a years worth of college credit with many of them being business courses. Over the summer after my junior years of high school I took my first economics course, micro-economics, online through a community college. At the time I had spent about four years being fascinated by economics. I would spend hours some weekends reading through the latest business and political news in the Columbus Dispatch. I read books such as "Understanding Wall Street" to learn how the financial system works. I would buy old economic textbooks from Goodwill to read. The one that I spent the most time reading was on economic development. It was an old textbook from the late 1990's and it still influences some of my thinking to this day. When I took the course I thoroughly enjoyed it and it was my favorite class up to that point. Even though I was familiar with many of the basic principles of economics and the indicators used to determine the overall health of the economy. The course still refined my thinking and gave me a broader perspective of some economic issues.
Aside from college credit plus classes and AP classes some high schools offer economics as an elective for high school credit. Some high students do not have the opportunity to take an economics course. Economics is essential for understanding how to make the most of our resources. I may have mentioned in a previous blog that economics is a social science that analysis how resources are used in a society. This would involve looking at the whole of society as business and government make important decisions on how to use their resources. This aspect of economics is called macro-economics. While analyzing the decision of individuals and individual companies is called micro-economics. Typically, a student taking economic courses takes micro-economics first then macro-economics. Of course, once a student completes these two principle classes, they have the opportunity to take more specialized courses such as labor economics. I will cover these subjects further in depth in subsequent blogs.
Economics is taught at most universities and offered as a major to undergraduate. While others offer a masters degree or even a doctorate (PhD) in economics. Typically, an economics major would take the principles courses mentioned earlier then a more advanced version of both classes. The student would also take courses in other disciplines such as the arts and humanities for general education. Also, its likely that calculus and a rigorous statistic course or two would be taken. Finally, econometrics which is an advanced course on economic statistics would be taken in lieu of a few high level economic electives. After graduation an economics major could either continue to graduate or start a career. The career options available to economic majors are quite board. These options include working for the government, working for a bank, in house economist for a company, and if the student continues to graduate school teaching at the university becomes an opportunity. There are probably many others that I did not mention. Typically, if an economist works for a company they are analyzing the market to help guide decisions. If an economist works for the government their usually either analyzing statistics for agencies that collect data such The Labor Bureau of Statistics or their helping guide policy making. If one continues to a masters degree in economics than usually advanced math courses such as differential equations would be taken. Also, depending on the program, the student may have to present a thesis paper that is about forty pages long or so to a thesis committee. The thesis paper generally involves an empirical study and the committee would then evaluate it. Then if one decides to pursue a doctorate then the student would have to write a dissertation which is typically a 100 to 200 pages long research paper that contributes to the field. Typically, a dissertation involves an empirical study that involves doing field work. Then the doctoral student would have a dissertation committee that the student would meet with every once in a while. When the dissertation is complete, which usually takes three to five years even at full time depending on the topic, the student then presents the dissertation before the dissertation committee. The job of this committee is to determine whether or no the student is worthy of a doctorate. Once the student has made a successful presentation to the committee and the committee is convinced. Then the student graduates with a doctorate and can teach the subject at the university level. Although, some adjunct professors do not have doctorates.
Outside of formal economic courses there some misconceptions about economics that I've pointed out in some of my past blogs. For example, some people think socialism can work even though its failed every time it was tried. Socialism ultimately fails because a collectivist system always gives people a far less incentive to work hard or innovate. I will this issue further in depth in later blogs. This not to say that our society needs to be individualistic to its death. Indeed, a society can balance the values of individualism with helping those in need. This is especially a problem on college campuses where some students who did not take an economics class misunderstand some the most basic principles of economics. Some of them think that socialism would work. This is not to support the thinking of the Republican or Democratic parties. I am merely pointing out some of the issues that can occur when economics is misunderstood.
Friday, March 1, 2019
Wednesday, February 27, 2019
Of Urban Poverty
The following is a quote from Rights of Man by Thomas Paine first published in 1791. This is from Chapter 5 titled "Ways And Means of Improving the Condition of Europe, Intersped with Miscellaneous Observations".
"Cases are continually occurring in metropolis, different from those which occur in the country,and for which a different, or rather an additional, mode of relief is necessary. In the country, even the large towns, people have a knowledge of each other, and distress never rises to the extreme height that it sometimes does in a metropolis. There is no such thing in the country, as persons, in the literal sense of the word, starved to death, or dying with cold fro, the want of a lodging. Yet such cases, and others equally miserable happen in London."
The world's population has increasingly moved to urban areas especially in the time after Paine's writings in the late eighteenth century due to industrialization. Urban poverty is still a major issue and the welfare system has only made it worse. Part of the reason for the breakdown of culture in America is the rise of mega cities. There are so many people crammed in together that there is no sense of community or neighborliness. This trend is accelerating as mega cities such as New York City continue to grow. It is important to note that most of the Yellow Jacket movement protesters are from suburbs and the country side. The Yellow Jacket protesters are protesting against Emmanuel Macron's technocratic policies that have left French culture to decay. A few months ago Macron said that there is no such thing as French culture. France makes a great deal of money from French culture. France is a popular tourist destination as it has many great medieval cathedrals and castles. Being a part of the European Union and the currency union means that the currency the French use, the Euro, is heavily influenced by the actions of the European Central Bank. The European Central Bank lowered interest rates in the wake of the 2012 European debt crises. At that time many European such as Greece, France, and Portugal were burdened by high public debt. In such public debt often came to close to 100% of GDP and many of the same countries are still just as indebted. In other words, some European countries have public debt that is equal to the total final goods and services produced within a country.
Since the 1950's urban sprawl has led to the creation of many suburbs around cities. During the 2008 recession we saw this trend reverse as people moved to the inner city closer to work. This trend led to the inner part of many cities being revitalized as wealthier people eventually moved in. Rent went up in many areas forcing low income families out of some neighborhoods. There are a couple of ways to prevent this from happening. One is rent controls or preventing landlords from raising the rent on low income families beyond a certain point. Also, development could be limited to certain parts of the city. Thus, preventing rent from going up in certain areas while other parts of the city are revitalized. Another consequence of this trend is that in many U.S cities the Suburban poor outnumber the urban poor as people leave suburbs for the growing inner city and low income families are forced out of certain parts of the inner city. Also, suburbs typically offer fewer services such as public transportation than large cities. As I've mentioned in my blog on immigration, one the possible ways to help the urban poor find good jobs is to match them with jobs in areas with labor shortages such as North Dakota. Also, there are high skilled industries in the U.S that face labor shortages and some of these industries offer blue collar jobs that do not require a college degree. So, another possibility is to offer training for blue collar jobs to low income workers. It may be more practical since many families may not be willing to move, especially out of state, for a job. In the long run if labor shortages in the U.S are filled by domestic workers especially workers that were previously performed low skill work than poverty would be significantly reduced.
"Cases are continually occurring in metropolis, different from those which occur in the country,and for which a different, or rather an additional, mode of relief is necessary. In the country, even the large towns, people have a knowledge of each other, and distress never rises to the extreme height that it sometimes does in a metropolis. There is no such thing in the country, as persons, in the literal sense of the word, starved to death, or dying with cold fro, the want of a lodging. Yet such cases, and others equally miserable happen in London."
The world's population has increasingly moved to urban areas especially in the time after Paine's writings in the late eighteenth century due to industrialization. Urban poverty is still a major issue and the welfare system has only made it worse. Part of the reason for the breakdown of culture in America is the rise of mega cities. There are so many people crammed in together that there is no sense of community or neighborliness. This trend is accelerating as mega cities such as New York City continue to grow. It is important to note that most of the Yellow Jacket movement protesters are from suburbs and the country side. The Yellow Jacket protesters are protesting against Emmanuel Macron's technocratic policies that have left French culture to decay. A few months ago Macron said that there is no such thing as French culture. France makes a great deal of money from French culture. France is a popular tourist destination as it has many great medieval cathedrals and castles. Being a part of the European Union and the currency union means that the currency the French use, the Euro, is heavily influenced by the actions of the European Central Bank. The European Central Bank lowered interest rates in the wake of the 2012 European debt crises. At that time many European such as Greece, France, and Portugal were burdened by high public debt. In such public debt often came to close to 100% of GDP and many of the same countries are still just as indebted. In other words, some European countries have public debt that is equal to the total final goods and services produced within a country.
Since the 1950's urban sprawl has led to the creation of many suburbs around cities. During the 2008 recession we saw this trend reverse as people moved to the inner city closer to work. This trend led to the inner part of many cities being revitalized as wealthier people eventually moved in. Rent went up in many areas forcing low income families out of some neighborhoods. There are a couple of ways to prevent this from happening. One is rent controls or preventing landlords from raising the rent on low income families beyond a certain point. Also, development could be limited to certain parts of the city. Thus, preventing rent from going up in certain areas while other parts of the city are revitalized. Another consequence of this trend is that in many U.S cities the Suburban poor outnumber the urban poor as people leave suburbs for the growing inner city and low income families are forced out of certain parts of the inner city. Also, suburbs typically offer fewer services such as public transportation than large cities. As I've mentioned in my blog on immigration, one the possible ways to help the urban poor find good jobs is to match them with jobs in areas with labor shortages such as North Dakota. Also, there are high skilled industries in the U.S that face labor shortages and some of these industries offer blue collar jobs that do not require a college degree. So, another possibility is to offer training for blue collar jobs to low income workers. It may be more practical since many families may not be willing to move, especially out of state, for a job. In the long run if labor shortages in the U.S are filled by domestic workers especially workers that were previously performed low skill work than poverty would be significantly reduced.
Tuesday, February 26, 2019
Of the Competition Between Small Businesses and Corporations
It seems that those wanting to localize the economy and those pushing
globalization are in competition. The possible decisions of both sides
could be modeled using game theory techniques developed by John Nash.
Some of the elites do not realize the economy is an open system. I suspect that one of the biggest weaknesses of the elites is that they
view the resources of those trying to localize the economy as being
too limited to damage their economic and political clout. By localizing the economy I do not mean that free trade would be avoided. Rather, regions and cities would benefit more from free trade. This is because under a system of placed based finance and industry the goods and services that a country exports would be produced by firms that would re-invest much of the profits from this activity locally and regionally within the exporting country. Also, companies would have a greater incentive to invest regionally and locally as the economy of regions and cities in a country improve. This is assuming that this process has already started and people with time and money to invest have started to think in local and regional terms. Thus, the human resources in a region would be greatly improved and consumers would have more disposable income. This is assuming that goods and services that require a high level of skill to produce would be produced in this region. Of course, consumers and companies would still buy imported goods and services as free trade would still take place. I have commented in earlier blogs on the impact of free trade and a full analysis of this is beyond the scope of this blog.
Despite the benefits of a more localized economy there are organizations that benefit from hyper- globalization. For example, in 2013 the CEO of Apple, Tim Cook, testified before congress after the company had avoided paying taxes on billions of dollars of profit made overseas via Irish holding companies. Apple made a deal with the Irish government to be taxed at a 2% and Apple transferred intellectual property to Ireland so that Apple could keep its profits made in Europe there. However, the Irish government claimed it could not tax Apple's overseas profits as it would be under the U.S federal government's jurisdiction and the U.S government did not tax Apple for these overseas profits as they claimed it would have been under Irish jurisdiction. Although months ago Trump gave a one time tax incentive for companies to move money back to the U.S, this policy is unlikely to have a significant long term effect. Another example is that during the 1990's the NAFTA trade deal was signed under the Clinton administration between the U.S, Canada, and Mexico. Shortly after this free trade deal was signed American manufacturers moved production overseas to countries with cheap and abundant labor such as Mexico and China. However, this trend recently started to reverse when companies started moving production back to the U.S from countries such as China. This is because when China enjoyed a decade of rapid growth from 2008 to to 2018 the wages of low skilled workers went up as demand for these workers soared. Also, China's One Child Policy which limits the number of children families are allowed to have has limited the supply of labor. This trend in the labor market combined with the high cost of shipping goods from China to the U.S has made it cheaper for manufacturers to move production to the U.S. Also, the jobs that are coming back to the U.S are high skilled jobs.
Corporations can raise capital by issuing stocks and bonds. That money can be invested in the business in the form of research and development or marketing. Also, the massive amount of marketing that large companies that focus on consumer products engage in builds a brand image for that company. Large companies can innovate by dedicating a group of employees to the task of improving one of their products as part of research and development. Or the company could collect data from consumers that use the companies product to find ways to improve the product. However, large corporations typically have many layers of management, so an employee with an idea would have to go through several layers of bureaucracy before he could start developing it. Typically, multi-national corporation are not as agile and cannot innovate as fast as a small business could. A corporation could create barriers to entry such as lobbying to the government for costly, unnecessary regulations that deter entry by small companies. Also, if the large company is in an industry where it would be dependent on suppliers such as the restaurant industry. For example, hypothetically if a large burger chain could prevent smaller firms from entering the market by buying vegetables such as lettuce from suppliers. Thus, raising the prices of the key ingredients. This is not purposeful price manipulation as the buyer has to buy these ingredients in order to produce enough burgers to satisfy demand. Rather, it is a by product of a company becoming so large that its purchases from suppliers impact the market price of those goods.
Small businesses can often develop a niche market for their products in the local communities they serve as customer service is typically better. Also, small businesses have more flexibility to innovate as they are only being run by one or two people. However, this opens up the possibility that the sole proprietor or partners either lack the knowledge necessary to make sound business decisions or they merely commit a fatal error that leads to the downfall of the business. This can be avoided if small business owners speak with successful entrepreneurs on how to properly manage a new business. Indeed, the success of small business is vital to the local economy. As cited in INC article, "The Truth About How Small Businesses Create Jobs and Benefit the Economy", The Bureau of Labor Statistics stated that since the end of the 2008 recession to March 2018, small businesses (businesses with less than 500 employees) have created 62% of all net new private sector jobs. A link to the articles is posted in the references below. As I've pointed out in previous blogs, the success of small businesses and credit unions would help keep the money local. Thus, enriching the local and regional economy.
Now back to my suspicion that the biggest weakness of those perpetuating hyper globalism do not think that those trying to localize the economy have sufficient resources to compete with them. Those pushing globalism may be afraid of something else threatening their political and economic clout. The first thing they may be afraid of is that the mechanism of propaganda they are using is not working. In other words, people may not be believing the commentary given in the corporate controlled media such as CNN or MSNBC. Media companies typically have political biases, so it is important to distinguish facts from commentary when reading articles by any news outlet. The second thing they are afraid of is the possibility that a third party will interfere. While it is unknown who this third party is. Former Assistant Secretary of Housing and Urban Development, Catherine Austin Fits, provides a possible explanation for the "third party". As I've mentioned in previous blogs, there have been a number of UFO sightings over the last decade and there is evidence that there is trillions of dollars missing from the U.S federal government that went toward a secret space program. I am not suggesting that the UFOs are aliens because they could be humans from Earth with advanced technology. These UFOs are probably not using anti gravity technology or other outlandish techniques that some researchers have speculated. Its further possible that many of these UFOs are not even intended for space travel. Which means its plausible that many of these UFOs are merely the product of secret research and not aliens. Catherine Austin Fits has further stated that there's evidence that there is so much money missing that some of it is possibly going to a third party. Perhaps in the some of commerce or even tribute. If a third party were to intervene its unclear what the third party would do. Its possible that combination of interference by a third party and a group of coherent observers that are not influenced by mainstream media could occur at the same time. Indeed, this would involve action by both a third party and a group of coherent citizens. As I've mentioned before, Catherine Austin Fits is the publisher of The Solari Report and I have posted a link to her website below.
https://www.inc.com/todd-mccracken/why-we-need-to-give-more-aid-not-less-to-small-businesses.html
Despite the benefits of a more localized economy there are organizations that benefit from hyper- globalization. For example, in 2013 the CEO of Apple, Tim Cook, testified before congress after the company had avoided paying taxes on billions of dollars of profit made overseas via Irish holding companies. Apple made a deal with the Irish government to be taxed at a 2% and Apple transferred intellectual property to Ireland so that Apple could keep its profits made in Europe there. However, the Irish government claimed it could not tax Apple's overseas profits as it would be under the U.S federal government's jurisdiction and the U.S government did not tax Apple for these overseas profits as they claimed it would have been under Irish jurisdiction. Although months ago Trump gave a one time tax incentive for companies to move money back to the U.S, this policy is unlikely to have a significant long term effect. Another example is that during the 1990's the NAFTA trade deal was signed under the Clinton administration between the U.S, Canada, and Mexico. Shortly after this free trade deal was signed American manufacturers moved production overseas to countries with cheap and abundant labor such as Mexico and China. However, this trend recently started to reverse when companies started moving production back to the U.S from countries such as China. This is because when China enjoyed a decade of rapid growth from 2008 to to 2018 the wages of low skilled workers went up as demand for these workers soared. Also, China's One Child Policy which limits the number of children families are allowed to have has limited the supply of labor. This trend in the labor market combined with the high cost of shipping goods from China to the U.S has made it cheaper for manufacturers to move production to the U.S. Also, the jobs that are coming back to the U.S are high skilled jobs.
Corporations can raise capital by issuing stocks and bonds. That money can be invested in the business in the form of research and development or marketing. Also, the massive amount of marketing that large companies that focus on consumer products engage in builds a brand image for that company. Large companies can innovate by dedicating a group of employees to the task of improving one of their products as part of research and development. Or the company could collect data from consumers that use the companies product to find ways to improve the product. However, large corporations typically have many layers of management, so an employee with an idea would have to go through several layers of bureaucracy before he could start developing it. Typically, multi-national corporation are not as agile and cannot innovate as fast as a small business could. A corporation could create barriers to entry such as lobbying to the government for costly, unnecessary regulations that deter entry by small companies. Also, if the large company is in an industry where it would be dependent on suppliers such as the restaurant industry. For example, hypothetically if a large burger chain could prevent smaller firms from entering the market by buying vegetables such as lettuce from suppliers. Thus, raising the prices of the key ingredients. This is not purposeful price manipulation as the buyer has to buy these ingredients in order to produce enough burgers to satisfy demand. Rather, it is a by product of a company becoming so large that its purchases from suppliers impact the market price of those goods.
Small businesses can often develop a niche market for their products in the local communities they serve as customer service is typically better. Also, small businesses have more flexibility to innovate as they are only being run by one or two people. However, this opens up the possibility that the sole proprietor or partners either lack the knowledge necessary to make sound business decisions or they merely commit a fatal error that leads to the downfall of the business. This can be avoided if small business owners speak with successful entrepreneurs on how to properly manage a new business. Indeed, the success of small business is vital to the local economy. As cited in INC article, "The Truth About How Small Businesses Create Jobs and Benefit the Economy", The Bureau of Labor Statistics stated that since the end of the 2008 recession to March 2018, small businesses (businesses with less than 500 employees) have created 62% of all net new private sector jobs. A link to the articles is posted in the references below. As I've pointed out in previous blogs, the success of small businesses and credit unions would help keep the money local. Thus, enriching the local and regional economy.
Now back to my suspicion that the biggest weakness of those perpetuating hyper globalism do not think that those trying to localize the economy have sufficient resources to compete with them. Those pushing globalism may be afraid of something else threatening their political and economic clout. The first thing they may be afraid of is that the mechanism of propaganda they are using is not working. In other words, people may not be believing the commentary given in the corporate controlled media such as CNN or MSNBC. Media companies typically have political biases, so it is important to distinguish facts from commentary when reading articles by any news outlet. The second thing they are afraid of is the possibility that a third party will interfere. While it is unknown who this third party is. Former Assistant Secretary of Housing and Urban Development, Catherine Austin Fits, provides a possible explanation for the "third party". As I've mentioned in previous blogs, there have been a number of UFO sightings over the last decade and there is evidence that there is trillions of dollars missing from the U.S federal government that went toward a secret space program. I am not suggesting that the UFOs are aliens because they could be humans from Earth with advanced technology. These UFOs are probably not using anti gravity technology or other outlandish techniques that some researchers have speculated. Its further possible that many of these UFOs are not even intended for space travel. Which means its plausible that many of these UFOs are merely the product of secret research and not aliens. Catherine Austin Fits has further stated that there's evidence that there is so much money missing that some of it is possibly going to a third party. Perhaps in the some of commerce or even tribute. If a third party were to intervene its unclear what the third party would do. Its possible that combination of interference by a third party and a group of coherent observers that are not influenced by mainstream media could occur at the same time. Indeed, this would involve action by both a third party and a group of coherent citizens. As I've mentioned before, Catherine Austin Fits is the publisher of The Solari Report and I have posted a link to her website below.
References
"The Truth About How Small Businesses Create Jobs and Benefit the Economy"
"Apple CEO makes no apology for company's tax strategy"
https://www.reuters.com/article/us-usa-tax-apple-idUSBRE94J0U320130521
"The Solari Report"
https://home.solari.com/
"The Solari Report"
https://home.solari.com/
Of Excessive Optimism
Physiological, cognitive, cultural, environmental, and political
factors can effect the decision making of consumers, business leaders,
and politicians. A sound culture and a coherent mind is necessary for
good decision making. I suspect that the culture was deliberately damaged from 2000 to 2008 to set the stage for the housing bubble of the early 2000's and the eventual 2008 crash. Indeed, many economist, politicians, and business leaders deliberately ignored signs that housing prices in the mid 2000's were overvalued. As I've stated in earlier blogs, many of these professionals and leaders will publicly state that this period of prosperity is different this time. Thus, dismissing the possibility of a financial collapse and estimating low odds of a recession. I've explained in earlier blogs how the lending tendencies of banks during the early 2000's led directly to the financial crises of 2008. Indeed, proper regulation and oversight may have prevented such a crises. This to say that simple, easy to understand regulations and adequate, not excessive, oversight of both commercial and investment banks are needed. In previous blogs I thoroughly explained the difference between these two types of banks and why they need to be separated in order to ensure the stability of the financial system. It is important to note that years ago Oxford scholar Dr. Joseph p Farrell has observed during interviews with the late George Ann Hughs, back when she hosted the Byte Show, that the bankers that testified before congress during the bailout hearings looked as if they were under a great deal of pressure. They requested that their should be no government oversight of the bailout funds provided to several major American banks by the federal government. Their request was subsequently granted despite evidence of wrong doing by these banks.
Another factor affecting the economy of the 2000's was the Iraq and Afghanistan wars. In this blog I will not comment on whether or not the U.S should have sent its military into these countries, but rather I will objectively analyze the economic effects of these wars. The U.S government spent over a trillion dollars on these wars during the 2000's. This increased military spending caused the budget deficit to widen and few steps were taken to finance these wars. Also, the Bush administration cut taxes in the early 2000's across the board meaning these tax cuts included all income levels. Since then these tax cuts have been extended by Obama and Trump. Although, Trump passed a tax reform bill into law about a year ago, but explaining this legislation is beyond the scope of this blog. In theory, the Bush administration could have taken steps to ensure that these wars were sufficiently financed while borrowing little if any money to pay for them.
The economic impact of increased government spending and a budget deficit is debated amongst economists. I will comment more on this issue in later blogs. Generally, economist agree that increased government spending may increase demand and a budget deficit could increase interest rates. This is because when the federal government runs a budget deficit the treasury must issue more treasury bonds. Thus, lowering the price of bonds, and increasing the interest rate. This is known as the crowding out effect. In theory, a higher interest rate encourages saving and discourages investments. It is important to note that in this context investment refers to investments made in physical capital such as manufacturing equipment. Such investments are often made by businesses to increase capacity, expand to a new location, or start a new business altogether.
Another factor affecting the economy of the 2000's was the Iraq and Afghanistan wars. In this blog I will not comment on whether or not the U.S should have sent its military into these countries, but rather I will objectively analyze the economic effects of these wars. The U.S government spent over a trillion dollars on these wars during the 2000's. This increased military spending caused the budget deficit to widen and few steps were taken to finance these wars. Also, the Bush administration cut taxes in the early 2000's across the board meaning these tax cuts included all income levels. Since then these tax cuts have been extended by Obama and Trump. Although, Trump passed a tax reform bill into law about a year ago, but explaining this legislation is beyond the scope of this blog. In theory, the Bush administration could have taken steps to ensure that these wars were sufficiently financed while borrowing little if any money to pay for them.
The economic impact of increased government spending and a budget deficit is debated amongst economists. I will comment more on this issue in later blogs. Generally, economist agree that increased government spending may increase demand and a budget deficit could increase interest rates. This is because when the federal government runs a budget deficit the treasury must issue more treasury bonds. Thus, lowering the price of bonds, and increasing the interest rate. This is known as the crowding out effect. In theory, a higher interest rate encourages saving and discourages investments. It is important to note that in this context investment refers to investments made in physical capital such as manufacturing equipment. Such investments are often made by businesses to increase capacity, expand to a new location, or start a new business altogether.