Economic Deflation and How to Prevent It

Is the problem that there is more to printing money than printing money? Is, in fact, the way printed money gets into circulation, that the Fed buys bonds, and thus gets money into the economy? What is the logical rabbit trail that leads to inflation from printing money? Would solving deflation this way work with todays low-interest rates? Why or why not? Deflation has been a hot topic since about 2001 and the fear of deflation does not look like it will subside anytime soon. What Is Deflation? This article on why money has value explains that inflation occurs when money becomes relatively less valuable than goods. Then deflation is simply the opposite, that over time money is becoming relatively more valuable than the other goods in the economy. Following the logic of that article, deflation can occur because of a combination of four factors: The supply of money goes down.The supply of other goods goes up.Demand for money goes up.Demand for other goods goes down. Before we decide that the Fed should increase the money supply, we have to determine how much of a problem deflation really is and how the Fed can influence the money supply. First, well look at the problems caused by deflation. Most economists agree that deflation is both a disease and a symptom of other problems in the economy. In Deflation: The Good, The Bad and the Ugly, Don Luskin at Capitalism Magazine examines James Paulsens differentiation of good deflation and bad deflation. Paulsens definitions are clearly looking at deflation as a symptom of other changes in the economy. He describes good deflation as occurring when businesses are able to constantly produce goods at lower and lower prices due to cost-cutting initiatives and efficiency gains. This is simply factor 2 The supply of other goods goes up on our list of the four factors which cause deflation. Paulsen refers to this as good deflation since it allows GDP growth to remain strong, profit growth to surge and unemployment to fall without inflationary consequence. Bad deflation is a more difficult concept to define. Paulsen simply states that bad deflation has emerged because even though selling price inflation is still trending lower, corporations can no longer keep up with cost reductions and/or efficiency gains. Both Luskin and I have difficulty with that answer, as it seems like half an explanation. Luskin concludes that bad deflation is actually caused by the revaluation of a countrys monetary unit of account by that countrys central bank. In essence, this is really factor 1 The supply of money goes down from our list. So bad deflation is caused by a relative decline in the money supply and good deflation is caused by a relative increase in the supply of goods. These definitions are inherently flawed because deflation is caused by relative changes. If the supply of goods in a year increases by 10% and the supply of money in that year increases by 3% causing deflation, is this good deflation or bad deflation? Since the supply of goods has increased, we have good deflation, but since the central bank hasnt increased the money supply fast enough we should also have bad deflation. Asking whether goods or money caused deflation is like asking When you clap your hands, is the left hand or the right hand responsible for the sound?. Saying that goods grew too fast or money grew too slowly is inherently saying the same thing since were comparing goods to money, so good deflation and bad deflation are terms that probably should be retired. Looking at deflation as a disease tends to get more agreement among economists. Luskin says that the true problem with deflation is that it causes problems in business relationships: If you are a borrower, you are contractually committed to making loan payments that represent more and more purchasing power — while at the same time the asset you bought with the loan to begin with is declining in nominal price. If you are a lender, chances are that your borrower will default on your loan to him under such conditions. Colin Asher, an economist at Nomura Securities, told Radio Free Europe that the problem with deflation is that in deflation [theres] a declining spiral. Businesses make less profits so they cut back [on] employment. People feel less like spending money. Businesses then dont make any profits and everything works itself into a declining spiral. Deflation also has a psychological element as it becomes rooted in peoples psychologies and becomes self-perpetuating. Consumers are discouraged from buying expensive items like automobiles or homes because they know those things will be cheaper in the future. Mark Gongloff at CNN Money agrees with these opinions. Gongloff explains that when prices fall simply because people have no desire to buy — leading to a vicious cycle of consumers postponing spending because they believe prices will fall further — then businesses cant make a profit or pay off their debts, leading them to cut production and workers, leading to lower demand for goods, which leads to even lower prices. While I havent polled every economist who has written an article on deflation this should give you a good idea of what the general consensus on the subject. A psychological factor that has been overlooked is how many workers look at their wages in nominal terms. The problem with deflation is that the forces causing prices in general to drop should cause wages to drop as well. Wages, however, tend to be rather sticky in the downward direction. If prices rise 3% and you give your employees a 3% raise, theyre roughly as well off as they were before. This is equivalent to the situation where prices drop 2% and you cut the pay of your employees by 2%. However, if employees are looking at their wages in nominal terms, theyll be much happier with a 3% raise than a 2% pay cut. A low level of inflation makes it easier to adjust wages in an industry whereas deflation causes rigidities in the labor market. These rigidities lead to an inefficient level of labor usage and slower economic growth. Now weve seen some of the reasons why deflation is undesirable, we must ask ourselves: What can be done about deflation? Of the four factors listed, the easiest one to control is number 1 The supply of money. By increasing the money supply, we can cause the inflation rate to rise, so we can avoid deflation. In order to understand how this works, we first need a definition of the money supply. The money supply is more than just the dollar bills in your wallet and the coins in your pocket. Economist Anna J. Schwartz defines the money supply as follows: The U.S. money supply comprises currency — dollar bills and coins issues by the Federal Reserve System and the Treasury — and various kinds of deposits held by the public at commercial banks and other depository institutions such as savings and loans and credit unions. There are three broad measures economists use when looking at the money supply: M1, a narrow measure of moneys function as a medium of exchange; M2, a broader measure that also reflects moneys function as a store of value; and M3, a still broader measure that covers items that many regard as close substitutes of money. How the Money Rupple Is Influenced The Federal Reserve has several options at its disposal in order to influence the money supply and thereby raise or lower the inflation rate. The most common way the Federal Reserve changes the inflation rate is by changing the interest rate. The Fed influences interest rates causes the supply of money to change. Suppose the Fed wishes to lower the interest rate. It can do this by buying government securities in exchange for money. By buying up securities on the market, the supply of those securities goes down. This causes the price of those securities to go up and the interest rate to decline. The relationship between the price of a security and interest rates is explained on the third page of my article The Dividend Tax Cut and Interest Rates. When the Fed wants to lower interest rates, it buys a security, and by doing so it injects money into the system because it gives the holder of the bond money in exchange for that security. So the Federal Reserve can increase the money supply by lowering interest rates through buying securities and decrease the money supply by raising the interest rates by selling securities. Influencing interest rates is a commonly used method of reducing inflation or avoiding deflation. Gongloff at CNN Money cites a Federal Reserve study that says Japans deflation could have been dodged, for example, if the Bank of Japan (BOJ) had only cut interest rates by 2 more percentage points between 1991 and 1995. Colin Asher points out that sometimes that if interest rates are too low, this method of controlling deflation is no longer an option, as currently in Japan where interest rates are practically zero. Changing interest rates in some circumstances is an effective way of controlling deflation through controlling the money supply. We finally get to the original question: Is the problem that there is more to printing money than printing money? Is, in fact, the way printed money gets into circulation, that the Fed buys bonds, and thus gets money into the economy?. Thats precisely what happens. The money the Fed gets to buy government securities has to come from somewhere. Generally, it is just created in order for the Fed to carry out its open market operations. So in most instances, when economists talk about printing more money and the Fed lowering interest rates theyre talking about the same thing. If interest rates are already zero, as in Japan, there is little room to lower them further, so using this policy to fight deflation will not work well. Fortunately, interest rates in the U.S. have not yet reached the lows of those in Japan. Next week well look at seldom used ways of influencing the money supply that the United States may want to consider in order to fight deflation. If youd like to ask a question about deflation or comment on this story, please use the feedback form.

Essay on Brown vs. Board of Education - 786 Words

Brown vs. Board of Education Although slavery was finally ended at the end of the nineteenth century black people found themselves still in the process of fighting. What they had to fight for was their own rights. The Emancipation Proclamation and the end of the civil war brought about literal freedom but the beliefs and attitudes of whites, especially in the south kept the black people repressed. In this paper I would like to share the research that I found that helped to launch the fight for freedom in every aspect possible for black people and that is the case of Brown vs. Board of education. This case to place in 1954 and helped to end the segregation laws that withheld black and white schools being integrated. Before I†¦show more content†¦This organization was founded in 1909 by sixty black and white citizens. In 1910 they published Crisis, a magazine that covered achievements for blacks in the arts, business and several other social fields. Most of the NAACP’s efforts where focused o n anti-lynching laws and gaining civil rights for blacks without discrimination. When they heard of Oliver Brown’s problem they were eager to help. So in 1951 the NAACP requested an injunction that would outlaw the segregation of Topeka’s schools. Their defense was that not only were the schools inherently equal, what with the conditions of the schools themselves, but also that it was detrimental to black children’s education and future to be living with such segregation. Black children must learn to associate with white children who are a large percentage of the population in order for their curriculum not to be curtailed. The Board of Education’s defense was that black children should learn in segregated schools because they lived in a segregated society and would for the rest of their lives, therefore teaching them at a young age the way society is will prepare them for the future. They also argued that such blacks as Washington Carver and Freder ick Douglas went to segregated schools and became great successes. The request for the injunction left the court with a difficult decisionShow MoreRelatedBrown Vs Board Of Education945 Words   |  4 Pagesbring on change. Brown vs Board of education is one case that still has great significance in history. Not only did it have a huge effect on segregation, but America as well would not be the same. My surroundings would totally change if this case had not been established. Brandon would not be my best friend, and sadly without the desegregation in schools we would have never crossed paths. Oliver Brown stood as the representative plaintiff in the case Brown vs. Borad of Education. He felt so strongRead MoreBrown Vs Board Of Education945 Words   |  4 Pagesbring about change. Brown vs Board of education is one case that still has great significance in history. Not only did it have a huge effect on segregation, but America as well would not be the same. My surroundings would totally change if this case had not been established. Brandon would not be my best friend, and sadly without the desegregation in schools, we would have never crossed paths. Oliver Brown stood as the representative plaintiff in the case Brown vs. Borad of Education. He felt so strongRead MoreBrown Vs. Board Of Education1143 Words   |  5 PagesBrown vs. Board of Education (1954) was a landmark Supreme Court Case that overturned the separate but equal ideology established by the earlier Supreme Court Case Plessy vs. Ferguson (1896). The Plessy vs. Ferguson court case had a profound affect on the social interaction of racial groups in the late 19th to early 20th century causing tension between the two most prominent races within the United States, the Caucasians and the African Americans, which included Hispanics and other non-white citizensRead MoreBrown vs Board of Education600 Words   |  3 PagesThe Brown vs Board of Education as a major turning point in African American. Brown vs Board of Education was arguably the most important cases that impacted the African Americans and the white society because it brought a whole new perspective on whether à ¢â‚¬Å"separate but equal† was really equal. The Brown vs Board of Education was made up of five different cases regarding school segregation. â€Å"While the facts of each case are different, the main issue in each was the constitutionality of state-sponsoredRead MoreBrown Vs. Board Of Education878 Words   |  4 Pages Brown vs. Board of Education Is our nation becoming segregated again in light of the recent current events? When you turned on your television last week, did you get a sense of remorse for both the black community as well as the law enforcement community? Our nation is facing many obstacles today regarding equal rights for all. Recently, I have read an essay released in a magazine called, The American School Board Journal, titled â€Å"The Ruling that Changed America† by Juan Williams which he alsoRead MoreThe Brown Vs Board Of Education Essay1343 Words   |  6 PagesThe Brown vs Board of Education was a remarkable set of five cases that paved the way for desegregation in schools and eventually resulting in the Civil Rights Act being passed. These cases however weren’t the only catalysts that forced the Supreme Court to question the wording of the Constitution and the Bill of Rights and neither were they the only pivotal cases that changed the way America as a whole looked at the black commu nity and how to interact with them. The Plessy vs Ferguson case wasRead MoreBrown vs. Board of Education2484 Words   |  10 PagesBrown v. Board of Education Brown v. Board of education case took place in 1954. It is one of the most important cases in the American history of racial prejudice. The U.S. Supreme Court recognized separate schools for blacks and whites unconstitutional. This decision became an important event of struggle against racial segregation in the United States. The Brown case proved that there is no way a separation on the base of race to be in a democratic society. Brown vRead MoreBrown vs. Board of Education2169 Words   |  9 PagesKirisitina Maui’a HIS 303 Brown vs. Board of Education Mr. Mohammad Khatibloo November 1, 2010 Brown v. Board of Education â€Å"To separate them from others of similar age and qualifications solely because of their race generates a feeling of inferiority as to their status in the community that may affect their hearts and minds in a way unlikely ever to be undone† by Chief Justice Earl Warren, Majority Opinion. Imagine you are a seven year old and have to walk one mile to a bus stop by walking throughRead MoreThe Brown Vs. Board Of Education Essay1195 Words   |  5 Pagesthen results in unfair education opportunities. Many residents of Charlotte NC are unaware of this, or feel they have no voice. It is however the law for students to receive equal education, and North Carolina has a No Child left Behind Act that is clearly not in full effect in CMS, which will eventually force CMS supervisors to start playing a role in how their schools will not fall short of making their students successful. Background The Brown vs. Board of Education of Topeka in 1954 ruledRead MoreBrown vs. Board of Education Essay1308 Words   |  6 PagesBrown v. Board of Education The case of brown v. board of education was one of the biggest turning points for African Americans to becoming accepted into white society at the time. Brown vs. Board of education to this day remains one of, if not the most important cases that African Americans have brought to the surface for the better of the United States. Brown v. Board of Education was not simply about children and education (Silent Covenants pg 11); it was about being equal in a society that

Cracking the Myan Code Free Essays

Watching the NOVA special Cracking the Maya Code made me realize a lot of things about the Maya’s and about their language that I had never before known. I thought it was very interesting how they figured out the Dresden codex correlated to a time the universe had started. Even more than that, they correlated that to our calendar, to help them date the hieroglyphics that they found. We will write a custom essay sample on Cracking the Myan Code or any similar topic only for you Order Now I think it is really interesting how they recreated what the Maya cities would have looked like, and how the civilizations would have been. I think one of the most important discoveries described in the video though was the one stilla of the Mayans has historical relevance. This discovery helped the archeologists to put together a much better picture of history and of life in Maya time. It is as close to written document as the historians are going to get, which makes it so cool that they found this discovery. | Another interesting thing I found in the video was the disappearance of language of hieroglyphics. I didn’t know that Maya’s were forced away from that language, and that many now did not know how to read it. I just kind of thought of it as a ‘dead language’ not as one that was a native language that had been purposely eliminated. That was one of the most interesting and saddest things that I found in the video. I wonder if the language of hieroglyphics had stayed more relevant if it would be easier for historians to find information about the culture, because they wouldn’t have to do as much language depiction. How to cite Cracking the Myan Code, Papers

Corporations Act Business Inconsistency Rules

Question: Describe about the Corporations Act for Business Inconsistency Rules. Answer: Interpretation Clauses In this Constitution; Act refers to the Corporations Act, 2001 or any other Act which replaces the same and is brought into force from time to time; Terms and expressions which have been defined in the Act shall have the same meaning under this Constitution as well; The provisions of this Constitution shall prima facie govern the company. However, when the Constitution is silent regarding any matter concerning the company, the Replaceable Rules under the Corporations Act shall apply. Thus, the company shall be partially governed by the Constitution and partially by Replaceable Rules. In the event of inconsistency between the Rules under this Constitution and the Act, the Rules or the portions of the Rules, which are inconsistent, shall be considered to be struck out and the relevant provisions of the Corporations Act shall be applicable. Business Management The business shall be managed by the directors; This Constitution confers on the directors all such powers which are vested in a Company under the provisions of the Act. Directors Meetings Any and all directors can summon a meeting by way of rendering reasonable notice to the other directors; Directors may elect any one director to chair the said meeting. Members Meetings The power to summon a meeting of members of the company is vested on the directors; Directors shall appoint an individual to act as the chairperson of the meeting; Shares The company does not put any restrictions on the power to issue shares. However, issued shares must fall into the below stated categories; Ordinary Shares A Class Redeemable Preference Shares B Class Redeemable Preference Shares When a class of share is identified by an alphabet, in the above clause, it signifies a distinct class of shares. When a members holds A class Redeemable Preference Shares, the following rights and conditions are applicable; Shall not possess any right to attend or vote at meetings; In the event of winding up of the company shall be entitled to paid up for the shares held under this class in preference to all other shares. However, shall not be entitled to any right on surplus profits or assets of the company. When a members holds B class Redeemable Preference Shares, the following rights and conditions are applicable; Shall possess the right to attend and vote at all meetings of the company. The member shall be entitled to cast one vote against each share held under this class; In the event of winding up of the company shall be entitled to paid up for the shares held under this class in preference to all other shares except the A class Redeemable Shares. However, shall not be entitled to any right on surplus profits or assets of the company. Mediation In the event of dispute between any of the following groups; Directors and Directors; Directors and Members; Members and Members; Company and Members The same shall be resorted through mediation rather than resorting to the court of law. Adoption and Amendment of the Constitution The members are being vested with the right to amend or repeal the entire constitution or parts of it subject to the passing of a special resolution either at an EGM or AGM. At least 30 days prior to the date of meeting a notice stating the fact about the proposed amendments shall be addressed to all the members of the company. Part 2 Section 198A This Section provides that in Australia businesses are to be managed by directors and they have the liberty to exercise all powers of a company except the ones which either the Corporations Act, 2001 or the constitution of the company specifically requires exercise by the company. Vesting of powers upon directors for managing company has been long established. The reason behind the incorporation of this provision in the Corporations Act is the fact that generally shareholders do not have the obligation of acting for the best interest of the organization, as a whole and directors have the obligation of acting in the best interest of the organization. This Section implies that shareholders are bound by the decisions of directors. This provisions tries to embody the rule that non-executive directors cannot be involved in the day-to-day business of the organization. This Section imposes collective responsibility upon the board of directors of for company governance and they are held acco untable for the same. In practice directors delegate most of their powers This provision empowers the directors of companies with a wide range of powers, In fact, a resolution of shareholders becomes ineffective for overriding decision of directors when they have the power to manage the company. This is one of the steps for codifying directors duties in Australia (austlii.edu.au). Section 191 Sections 191-195 of the Corporations Act, 2001 contain provisions concerning conflict of interest. This Section imposes an obligation on the directors of company to disclose matters relating to the company which are of personal interest to the. Such disclosure is required to be made to the other directors. However, certain exceptions are laid down under Section 191(2). One example of such conflict of interest is as follows; a director has some personal interest in any contract, which the company enters into (austlii.edu.au). The purpose of the legislature underlying the incorporation of this Section in the Corporations Act, 2001 is to make directors of companies refrain from using their position for their own personal benefit. If a director commits breach of any of the duties he/ she is liable to be subjected to compensation under the Corporations Act. This legal obligation would deter directors of corporations in Australia from taking action attempting to make personal benefit by ut ilizing his/ her position in the company. Section 191 is one of the checks, which the legislature has introduced in relation to the unfettered powers imposed on the directors. It embodies the principle that directors must take decisions for the betterment of the company and not otherwise. Section 250R (2) (3) Section 250R(2) was incorporated in the Corporations Act, 2001 by the Corporations Amendment( Improving Accountability on Directors and Executive Remuneration) with the intention of holding election for appointment of directors, if in two successive meetings, 25% of votes are recorded against the remuneration package of directors. The election must be held within a period of 90 days. Under this Section a listed company has the obligation of adopting remuneration report during its Annual General Meeting. Hence we may state that Section 250R(2) requires passing of resolution concerning remuneration report. However, Section 250(3) lays down that the voting under the said Section is considered to be advisory in nature and does not impose binding obligation upon either the company or the directors. Both the sub clauses deal with adoption of advisory resolution concerning remuneration report (austlii.edu.au). The notice of the Annual General Meeting must state that such resolution would be adopted. Key Management Personnel and parties who are closely related are prohibited from casting their votes for this resolution. References Austlii.edu.au. (2001).CORPORATIONS ACT 2001 - SECT 191Material personal interest--director's duty to disclose. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s191.html [Accessed 20 Sep. 2016]. Austlii.edu.au. (2001).CORPORATIONS ACT 2001 - SECT 198APowers of directors (replaceable rule--see section 135). [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s198a.html [Accessed 20 Sep. 2016]. Austlii.edu.au. (2001).CORPORATIONS ACT 2001 - SECT 250RBusiness of AGM. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250r.html [Accessed 20 Sep. 2016].