The Dow Jones Industrial Average is going up and down. One day it will go up a couple hundred points, but the next day it will go down a couple hundred points. It measures the price of publicly-held stocks. It causes alarm to see a part of the stock market, which is a part of the economy, be fluctuating at an uncertain rate.
A few months ago, a bailout plan was signed to put $700 billion into the economy. They have started to implement that $700 billion. There is absolutely no guarantee that it will work. There is a strong possibility that this bailout will cause deflation, the devaluation of money. Money is just paper with special ink. It is supposed to represent something, usually gold or other precious metals. If the government keeps printing money like it will solve everything, money will be worth nothing and the entire economy will collapse. When something abounds, its value is lessened. For example if you had 10 boxes of chocolate and someone tried to barter with you with chocolate, it would be worth nothing to you because you already have chocolate. This is what happens to currency when too much is in circulation; it becomes worthless paper.
Even if the bailout does work, it would have been an unconstitutional solution. The government is not supposed to "fix" the economy. The government is supposed to have as little involvement in the private sector as possible.
A recession may be at the doorstep, but you should not depend on the government to remedy the problem.
4 comments:
It is hard for any government to regulate a massive and complicated national economy, that's for sure. Be careful not to mistake the Dow Jones Industrial average, which is just a measure of the price of certain shares of stocks in publicly-held companies, for "the economy," though!
Also, the $700 billion injection into the capital markets has only very recently begun to happen in terms of money really flowing into the system. We don't yet know if this will "work," but we sure hope it does!
Welcome to blogging! I hope you find it informative and rewarding. I've learned so many new things just from researching subjects I want to blog about and I hope you do as well.
I want to emphasize what Ron Coleman said: don't confuse the DJIA with 'the economy.'
I also think you should research the definition of 'recession' and maybe compare today's issues (like unemployment numbers and gas prices versus gas availability) to those of the '70s. I remember long lines for gasoline and only being able to get gas a an even or odd numbered day, based upon your license plate.
Unemployment back then was in the teens, as were interest rates...but the government wasn't crying over how they needed to extend unemployment insurance.
Know your history and you'll be better able to share commentary on today's events.
Good luck with your project!
List to what Jim Cramer has to say about the economy. You'll learn a lot from the "Mad Money" TV show:
http://www.cramers-mad-money.com/
Welcome to the blogosphere. I want to encourage all of you to start using pictures and links to make your posts more engaging and fact specific. I received an email that your group is doing this project for a grade. Hopefully you'll get more out it then you ever thought you would. Good luck!
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