Chapter 7 Economics Blog "digital wallet"

An article in the Financial Post discusses the introduction of virtual credit cards. Visa is one of the world’s biggest credit card company and they plan on launching “digital wallet” which is expected to be accepted throughout the world. There is no specific date for the launch of this new product but it is expected to be introduced near fall of 2011. A basic run down of how “digital wallet” works is by having the customer enter his/her e-mail address and password which brings up their credit card information. This process is beneficial for the consumer because online purchases become quick and easy.

Our economics textbook’s topics ranges through out money and banks which can be further specified into one topic which is transactions. Transactions have many meaning to it because it is based on the amount of money and the level of income that the owner possesses. Regularly the owner would only spend on the amount of their income but they wouldn’t necessarily overspend. However the textbook also talks about bank credit cards and this enables the owner to overspend and go into debt without them noticing it and this reflects upon me because this has happened to a few of my cousins.

Authorization is a definite necessity when it comes to credit cards or else fraud would be easily initiated. The textbook mentions authorization thoroughly by talking about the person’s credit line easily going into debt. With the new introduction of “digital wallet” I believe that Visa is going to have to think about the ease of people going into debt as well as the banks. Banks will be constantly dealing with debts and minimum payments that eventually lead to our economy’s strength. Spending is great for our economy but when it comes to debt it really stresses out our economy.

How long do you think it’s going to take to get to all virtual cards? How many years?

I think it is going to take about 5-10 years to get to all virtual cards.

Why?

The reason I think is because the newer generation people are alot more used to technology such as smartphones and are a lot more lenient upon upgrading. The amount of cash people carry on average has been falling continuously in the past 3 years.
Therefore we can expect to see the average amount of cash people carrying around drop even more,
and maybe even disappear completely.

Who will not be on board with this new virtual wallet?

I think that baby boomers will not be okay with the virtual wallet because of the security and the tradition of using physical cash.

What companies are going to be affected negatively by this? Name 3.

Three types of industries that will be affected negativly are leather industry of making wallets, small traditional businesses because they have to pay extra to upgrade and printing money industry will be totally wiped clear.

Who is going to make money from this? Name 3.

Three industries that are going to make money from this are; mobile banking, retail (faster transactions), smartphones.

The Great Depression and The Recession

1. How did The Great Depression start?


The main reason The Great Depression started was because of the stock market crash of 1929 which in result created a spiraling domino effect because after the market crash it lead to :

• Bank failures
• Conservation of income
• Noneffective goods production
• Drastic unemployment rate increases
• Trading barriers that caused frustration during exports/imports.

2. How did the recent recession start?

The recent recession of 2007 started mainly because of the huge deficit that the US had created as well as the real estate market crash which caused a domino effect that lead to: 

• GDP & Capital investment decrease
• Industrial output decline
• Drastic unemployment rate increases
• Increased fuel prices
• Sluggish income flow

3. How did the gov't take part of the following event? Were they successful attempts?

The gov't took huge roles to aid the process of recovery of both depression and recession. During the depression the gov't

• Heavily taxed imports
• Social services increase
• Food vouchers
• New jobs

During the recession of 2007 the gov't took the roles of :

• Bailout's for large corporates
• Bankruptcy prevention programs
• Employment increases
• Stabilizing real estate markets

4. What factors are now present that were not during "The Great Depression"?

The advantages that we have now in a modern society compared to the past of 1929 are:

• Era of technology
• Government support of services
• Banking tactics
• Recorded studies of past mistakes

5. How did these 2 events affected United States GDP?

Clearly during these events, GDP definitely dropped and there were many factors that contributed towards the decrease of GDP and they were :

• Huge conservation of money because of society's fear.
• Luxury items were second thoughts which lead to over production.
• All points mentioned above.

Since there was a drop in the GDP rates this meant that US Dollars aren't as valuable and employment, production were scarce.

6. Reflection of which one made the biggest impact

I strongly believe that "The Great Depression" caused the greatest impact of a countries financial history. The depression literally brought many people into immense levels of stress because of low incomes, no jobs, scarce food. The Great Depression lasted for 10 years which is incomparable to the recent recession since the event did not bring the economy to a complete halt. 1929 was the very early years of the development of industries so they were unexperienced which lead do the disastrous stock market crash. Overall "The Great Depression" created the most impact and many has learned from it.

Source:
http://www.winnipegfreepress.com/our-communities/prime-times/Apple-unveils-the-iPad-2-118201574.html

Summary:

On March 25^th Apple is going to be releasing their second generation of the iPad which is called the iPad 2. The replacement of their original product shows that this is a result of Apple’s determination to out shine it’s competitors by continuing to lead the market. The original has sold over 15 million units in 9 months with over 65,000 apps. The only difference between this model and their original are some specifications such as the graphics, cpu and two cameras – one front facing and the other back facing. The iPad ideally is just for simple activities such as surfing the web, sending e-mails, sharing photos and watching movies. Overall the iPad 2 is the perfect combination of technology and liberal arts.

Connections:

           

            Their introduction of their second generation tablet appears to be a great intellectual move by Apple because this ties into the aggregate demand factor “new product”. Since this introduction is about the second generation tablet this proves to the consumers that their first generation was a success in result revealing Apple’s determination. The iPad 2 may change those who have questioned their first generation tablet changing their spending patterns. Lifestyles of consumers may change as they may choose the product over books or use their iPad 2 as a daily scheduler. In result the introduction of this new product certainly will be a game changer as many competitors would have to compete with apple’s huge consumer base and the result of such demand causes price increases.

Reflection:

            As a owner of an iPad 2 this has certainly changed my lifestyle because as mentioned above I use this product to read books and watch movies when I could be watching it in theaters. I have seen the product change the lifestyles of other people because they use the product in the same manner as I do but often a lot more such as Facetime conversations. The demand of the product certainly shows because of people who are willing to line up 24 hours before launch and with this high volume of demand Apple certainly wouldn’t price their second generation tablet for a generous price, in fact the prices roam around $500 per unit. $500 for technology that makes life easier and a lot more fun, to me sounds like it’s worth it with no regrets.

Unemploymet Rates are not Reliable Idicator of Economic Strength

Source: http://www.cbc.ca/news/business/moneytalks/2011/02/michael-hlinka-dont-fixate-on-unemployment-the-numbers-mean-little.html

Summary:

The article talks about how citizens have their time where there are different expectations that exist that guides you to what you choose. Every year the unemployment should be different and unpredictable. The unemployment rate in January raised to 7.8%, of course in ratio terms it looks quite small but in the actual population number it is quite immense. To a few people it just doesn’t makes sense because around 69 thousand new jobs were created the last month, so how did unemployment rates raise? Micheal explains that there are more people who joined the labour force and started to look for jobs actively. An example of the fixated percentages being unconfident representation is Alberta. Alberta’s economy is the strongest compared to the other provinces yet it has the highest fluctuating unemployment rate. Overall these percentages are not what people should be looking at because it is not a very good indicator of economic strength.

Connections:

This article is connected to many topics that we have learned in our economics 12 class especially unemployment rates. A few classes we discussed the unreliability of unemployment figures of how it is not accurate and how it is only a rough estimation. To understand how the unemployment number works we first have to take in consideration that the age prospected to be in the work force is 15-65 also the amount of surveys conducted. First off the unemployment rates are unreliable because of varied people participating in the work force and second the amount surveyed is usually around 1000 people to represent all of Canada. To be considered unemployed you would have to be looking for a job, that means if a person has lost hope and gave up trying to search for a job they are not counted towards the labour force. There are also a few types of unemployment such as seasonality, frictional, structural and demand deficent which all four varies at different times. The elements mentioned above also relate towards another topic that we have covered which was economic strength. Since the unreliability of unemployment seems to be facts than it concludes how economic strength is not determined by unemployment rates.

Reflection:

I completely agree with the article about how the unemployment rate is a unreliable indicator of the condition of our economy. It takes many regulated requirements to be considered unemployed for example if people have given up on looking for a job or being a student they are not considered unemployed. Determining the economic strength of a country is difficult because you can never truly reflect accurate information. An example is that we know that Alberta is strong because of their oil production sales but their unemployment rates are varied immensely. You would think that a province being well developed would have low unemployment rates but it’s a factor that is unreliable leaving economic strength to be contradictory. How do we determine economic strength? We can determine economic strength by changing the regulations upon measurements of economic factors such as unemployment, expenditures, consumption, sales and etc.

Direct Tax Chapter 4

Summary

A known media company named Nationpost published an article talking about Illinois having an income tax increase. The current situation in Illinois is that they are $8.7 billion dollars in overdue bills and the state believes that increasing taxes will solve their dilemma. Currently the personal tax rate is 3% and increase to 5% shortly overall that equates to $600 for every $1000 in state taxes. Similar situation happened in BC where the HST was introduced but could not compare to Illinois’s taxes. Their government makes it believable that extra tax charges are temporary but in reality it would be permanent because in Canada the government 94 years ago has said that income tax was temporary.

Connections

            The article relates to a term in economics and this term is called direct tax. Direct tax can be defined as a tax imposed on the person who is intended to pay the tax. Everybody in the working fields receives a salary of what they work for but when tax increases are introduced nobody is ever content. Tax increases means more money to dish out and less food on the table. Sure the increase wouldn’t hurt the riches but how about those who rely on their weekly pay cheques to survive? The extra 2% change could eliminate a day’s worth of meals. The taxes go towards the government to pay off bills and other expenses but usually it should come back to the city and that’s all the citizens of Illinois could hope for.

Reflection

            Everybody is exposed to taxes because either you pay for it or your parents do. Taxes is a very important concept to learn because there are very different unique types that you should understand. Earlier on I talked about how increasing taxes could really hurt individuals who rely on their weekly cheques. These people often feel hopeless because of the increase and they would have to cope with it because the government rarely creates a flawless balanced system that helps this level of society. I have a few cousins who are in this situation right now except they are dealing with HST and it certainly makes them have a second thought before buying goods.

Source: http://fullcomment.nationalpost.com/2011/01/13/illinois-hikes-taxes-66-in-financial-highwire-act/

Supply and Demand for SC2

Summary

This article discusses one of the top RTS games of the year. If you haven’t heard of it already then you probably aren’t a gamer. This highly competitive game is named Starcraft 2 which is a sequel towards the first one that launched years ago. Starcraft 2 launched on July 2010 and its first month it has sold over 700k. The sales contributed towards the statistics gain for games and it had raised it to a 103% increase over the last July. Blizzard the company behind this exceptional game had brought Starcraft 2 overseas to over 10 countries and sales continue to grow.

Connections

The discussion over the phenomenal sales over the game Starcraft 2 can be easily tied into supply and demand. In economics there is a general rule about supply, demand and it’s equilibrium point. This equilibrium point is significant because it shows the perfect balance of supply and demand in order for profits to be made. Blizzard as an example has done an exceptional job presenting this equilibrium point because it shows that the high demand has been met with the supply therefore creating a great surplus in revenue going with the figures of 700k in less than a month.

Reflection

I am a consumer towards blizzard because I own a copy of the game myself and dished out $60 out of my pocket just for some entertainment. I agree with what Blizzard has done because a game is not fun if it is played alone and since there is an enormous amount of sales it means that there has to be an enormous population for the game. Blizzard has shown the world how games are supposed to be done and I am impressed the reaction of the population has because the sale figures explain everything. With their smart marketing techniques and their amazing team they definitely rise to the top in sales and it won’t be going down for months.

Source: http://arstechnica.com/gaming/news/2010/08/starcraft-2-sales-blitz-a-success-sales-crush-console-games.ars