Economics 101

Most of us have a savings account. Also, a checking account. Some savings accounts are of longer length, like certificates of deposit, IRAs, and money markets. Household budgets are a common feature, but not as common as they need to be.

Basically, we know where we are financially: in debt a lot, or not; auto loans and mortgages are common debts for most families. Consumer debt for major appliances, repairs or remodels are another frequent type of loan. Of course, bank credit cards (VISA, Mastercard, for example) make up a great amount of debt.

Calculating household income and including it in the budget is something we do often, primarily with an eye toward what we want to happen so we can buy a wanted thing, or travel to an exciting locale. Incomes are most often not in our control. To get more we work more, have a second job, or another family member gets a job and shares the dollars with the family budget. Once our households were fueled by one earner (dad); today both spouses most often hold down full-time jobs. Less often but growing, are households where one worker holds down two jobs, a full-time one and a part-time job.

Naturally, we can invest in ourselves by gaining experience, training or a college degree (bachelors, master’s or PhD). This investment helps develop work into a career with more satisfaction and larger paychecks. Such investment, however, costs plenty in time and money. It is not easy, and the payback is not guaranteed.

The above few paragraphs are the basics of economics 101 based on household dollars and decisions. There is more to economics, however, and here are a few of them: other households in your neighborhood, town, county and state. Taken together in large or small groups creates regional markets. These are economies of various scales and are made up of individuals and households. Products and services supported by households provide the supply and demand elements of a larger economic purpose and functioning. Our salaries and wages are defined by such activities, as well as the prices individuals and households pay for the goods and services they need to live routine lives. Our individual decisions contribute to participation in many markets. Both personal income and cost of living are results of that participation.

Most of these markets are not totally free. Other authorities make decisions and policies that affect both the activity level and pricing within the local economies. Those authorities include government (municipal, county and state), industry giants with supply and pricing power, trade associations which help small businesses compete with larger players, and the policies and authority of the federal government and its agencies. We’ll leave international market determinants for a later discussion.

All in all, supply and demand are not the sole determinants of pricing and haven’t been for a long time. External influences ‘control’ pricing much more directly than ‘free marketers’ would like us to think. And the power to have an effect is not all on federal regulations. Many factors control economic results, and federal policies often fail dismally.

Making the economy function smoothly and successfully is the aim of many policies by regulators. Efforts to do so, however, are very complicated and often fail.

Those who think drilling for more oil now will lower gas pump prices are in for a large shock. $2 gas is very unlikely. $1.99 for a dozen eggs is also quite unlikely. Declaring short term interest rate reductions by the Federal Reserve Bank does not necessarily lower mortgage interest rates. The former are dropping, and the latter are currently rising.

The MAGA republicans are in for a lot of disappointment. Tariffs do not work the way trump claims. And the result will be higher prices, trade imbalances, and a rise in national debt, interest rates and related pricing for goods and services. Just wait and see.

Most Americans wrongly believe they understand Economics. They don’t. This is a lesson to be learned by many folks as the new White House takes the reins of the economy. I shudder at the prospect of failures.

January 8, 2025

  

  

Comments

Post a Comment

Popular posts from this blog

Intimacy

As we mature, we become deeply involved in relationships. Some of this is basic family relations – siblings, parental – and the like. Next is friends who enter our homes and we theirs. Neighbors, classmates, mutual hobbyists and so forth. Then we develop friendships that go much deeper. We comfort one another when we are hurting physically or emotionally. We discuss the matters of life and learn much more about ourselves and each other. We can even anticipate how others will react to various situations and stimuli. Good friendships do not spread to everyone we know. No, good friendships are special, close and deeply personal. We focus attention and brainpower on these few friends. Some special relationships focus on specific topics of interest and importance. Yes, we have specialized friendships. Most common. But one day, we get to know one person very well. An emotional connection forms with deep roots. A need to know the person more fully expands in personal ways. We sense this b...
Read more

Bits & Pieces

Pie: Apple pie more specifically. With Thanksgiving just passed, many of us enjoyed a good apple pie. Sure, there was pumpkin to accompany the turkey, but in our family multiple pies are offered in the holidays. Apple is surely one. Pecan, pumpkin and others, too. But I almost always choose apple. When I was in college, I was asked what kind of pie did I eat most often. In front of my mom, I answered apple, because I was always looking for a pie as good as mom’s own. Of course my mother was pleased, but it was a true statement just the same. When I was married, Ann’s pie was darned good. Her mother’s recipe. But we fiddled with the recipe until it took on its own generational name, and boy, was it good! Today I still order apple pie for dessert because I am always looking for a great pie to challenge our family recipes. I rarely do find such a prize. Do others do the same? Do you search for a great pie of choice, continually? If you do, what’s your story? Why do you do this? ...
Read more

Remembering Tom Sherlock

Tom Sherlock died on Wednesday, April 3rd. He was 65 years old and did not survive a heart surgery. That was his unexpected end and sad enough. But there is more to his story. Tom joined Dan Schuyler and George Safford to create what became the Village Chronicles, a weekly newspaper serving Warrenville, Illinois. That paper expanded to serve Winfield and then West Chicago. The paper published for eight years and built a good reputation for itself. Tom served the paper in several ways. He was our information technology guru, provided hardware and software to support the paper's operations. He was our sole bookkeeper, accountant and financial manager. He designed our distribution process and provided office space for meetings and layout and typesetting. His efforts supported the work of 32 volunteers who wrote and reported on the communities we served.  The newspaper broke even financially most of the time, but it was a struggle. Tom managed to find money to keep the newspaper afloat...
Read more