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Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985.  Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand (which is now part of PricewaterhouseCoopers).  She attended the University of Michigan and Wayne State University.


  • Foreign shoppers in the United States

    image from internetretailer.com When American shoppers choose to shop in one state vs another--it is probably only the tax rate they are looking to get a deal on, as most product prices are similar. Moreover, this price dodge will even out in the end, as state taxes have to be paid in the state the product is going to be USED, anyway. But product prices between countries can change a lot. Here are some examples: Slingbox 350 : When it goes on sale in Mexico it will cost $75 more than it costs in the U.S. This is possibly because of the way things are taxed, but also because there is less competition among electronics dealers in Mexico. Apple computers : These can cost $500 more in the United Kingdom than in the U.S. And iPads can cost $160 more. Car tires : Black Friday sales on car tires brought Canadians over the border for bargains. Adobe software : According to the article it is " cheaper to fly to the U.S. and back to buy Adobe's software than it is to buy it in Australia" Some products, such as Photoshop, cost $1700 more overseas. Middlemen try to create other buying opportunities for foreigners: image from info.opas.com Source: " Why Foreign Consumers Shop In the U.S, " by Jeff Tyler, Marketplace Morning Report on American Public Media , March 7, 2014. Follow up: What products are cheaper for Americans overseas? What international laws may be violated in some of the travel-and purchase transactions? Can the workarounds be justified ethically?
  • Jobs added in February: what does it mean?

    [View:http://community.cengage.com/GECResource/themes/ gew/utility/ :550:0] Link to video from Bloomberg , via LA Times. How can the number of jobs increase by 175,000 in the last month...at the same time the unemployment rate ALSO goes up by .1%? And is this news good or bad? Part of analyzing labor reports is looking at what had been predicted...so since 150,000 new jobs had been predicted by economists, the increase of 25,000 more than had been predicted is a positive outcome. 162,000 of the new jobs were private sector jobs and 13,000 of the new jobs were government jobs. The unemployment rate was expected to stay flat at 6.6%, but it did increase to 6.7%. Is this because more people than were expected to look for work were entering the job market? Is it because the bad weather decreased job opportunities or eliminated some part time jobs? The Labor Report is filled with statistics, but not many answers. Other factors measured include: The percentage of people in the workforce The length of the average workweek in hours Average hourly earnings (which were at $24.31/hr in February) Source: " Economy adds 175,000 jobs in February; unemployment rate up to 6.7% " by Jim Puzzangherra, Los Angeles Times , March 7, 2014. Follow up: How much has the bad weather affected the employment rates, according to the video? What employment sector LOST jobs in February? How would you explain this loss?
  • "Bull Market's 5th Birthday" may be its last...

    It seems as though the celebration of five years of a Bull Market , which I wrote about last week, was the last bit of stock market cheer we might be hearing for a while. Investors seem to be responding to several negative economic factors, and the Standard & Poor's 500 stock index is down 5.8% since January 15th.The S&P 500 index was at 1741.89 at the end of trading on Monday, February 3rd. Some of the negative economic factors include: the pullback of "quantitative easing" by the Fed, which stimulated the money supply the global response to the change in U.S. monetary policy a manufacturing industry survey released on February 3rd (whose "bad" numbers were a result of this winter's bad weather) Observers are now awaiting the market's response to the employment numbers which will be released later this week, on Friday, February 7th. Source: " As Recovery Looks Weak, Stocks Take a Deep Dive ," by Nathaniel Popper, The New York Times Dealbook, February 4, 2014. Follow up: What is the annualized percentage decrease, based on the 5.8% number noted above, that might be projected if the current bear trend goes unchecked? [Hint: it is an appallingly large number, and it is unlikely that the market will continue to plunge at the rate it has been falling over the last 2 weeks. Nevertheless, it is an interesting number to compute, to put the percentage in an annualized perspective.]
  • "Fragile Five"...what does THAT mean?

    Image from money.cnn.com The "Fragile Five": Turkey, Brazil, India, South Africa and Indonesia. These are emerging-economy nations that have become too dependent on investments from foreign countries. The recent change in the U.S. government's stimulus policy has resulted in less availability of investment money. Much of this money flowed into these fragile emerging economies. The most recent event that has caused concern among global economic observers occurred this week: Turkey raised interest rates by 4.25%. This was followed by an interest rate increase by India...and then another by South Africa. The higher rates are meant to attract foreign investment. But now that investment funds are not as available as they were, the underlying value of the business investment becomes a more important factor in determining where an investment might be made. Sources: "‘ Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil " by Landon Thomas, Jr., New York Times , January 28, 2014. " South Africa joins battle against sell-off "by Alanna Petroff, money.cnn.com , January 29, 2014. Follow up: Research another important acronym for global business observers: BRIC. What countries does that acronym stand for? How have the economies of those countries fared? What does the bar graph in the attached article from the New York Times indicate for the Fragile Five versus the BRIC countries?
  • Income inequality

    [View:http://community.cengage.com/GECResource/themes/gew/ utility/ :550:0] video from mediaMatters. com Income inequality may be the greatest problem that current and future generations of Americans face. It matters little who is to blame. It is important to identify and act on the what can be done about it. It is interesting to see how one's perspective can change when one's circumstances change. If a person is doing really well, sometimes they think that income inequality is not an issue. But if they lose their job, or become disabled or...like all of us who are lucky to live so long...grow old--the principle "I've got mine...too bad if you don't have yours" doesn't seem to be the best way to go. Source: " Fox Doesn't Believe In Income Inequality But Still Blames Obama For It ," by Tyler Hansen, Media Matters.org , January 14, 2014. Follow up: What are your thoughts about income inequality? Are you a "have" or a "have-not"? What about your parents or grandparents? Do you think that solutions to this perceived problem should be implemented? Who should be in charge? What should the governing values be?
  • China way ahead of U.S. in stimulating the economy

    image from www.economist.com " Move over, Janet Yellen and Ben Bernanke. Step aside, Mario Draghi and Haruhiko Kuroda. When it comes to monetary stimulus, Zhou Xiaochuan, the longtime governor of the People’s Bank of China, has no rivals ." This is a quote from the NYT article about how the Chinese government's uses of economic stimuli have strengthened the Chinese economy at a far higher level--and more effective level--than the U.S. government has helped U.S. businesses. China has pumped 300% of the money that was available in 2006 into the Chinese economy in 2013. No wonder Chinese production and sales have had such a growth spurt! Nevertheless, there are differences in the ways that this stimulus works. In the U.S. the government pumps money into the economy by buying bonds. In China, government pumps money into the economy by " issuing more renminbi to bankroll its purchase of hundreds of billions of dollars a year in currency markets to minimize the appreciation of the renminbi against the dollar and keep Chinese exports inexpensive in foreign markets. " That amounts to considerable support. However, now, there is talk of reining in that support...and doing so without damaging the economy. The People's Bank of China and the Chinese government are moving slowly on this one. Source: " With China Awash in Money, Leaders Start to Weigh Raising the Floodgates ," by Keith Bradsher, The New York Times, January 15, 2014. Follow up: What are your thoughts about government stimulating the economy? Support your position with multiple internet sources. How has government stimulus helped China? Would that approach have worked the same way in the U.S.? Why or why not?
  • Should bicyclists and hybrid drivers pay more taxes?

    image by Justin Sullivan/Getty Image Fuel tax revenues help fund road maintenance and expansion...but if a person is biking or driving an electric car--they aren't paying as much in fuel taxes. So much for the " unforeseen consequences " of a decision to be more sustainable. How can a tax loss like this one be replaced? ...Maybe by creating a new tax on mileage, or on bike usage? It may be hard to measure, but the use of roads by vehicles possibly could be a tax that is shared equitably...or should it? Should gas-guzzlers pay more than the energy efficient? Do bikes "use" roads at the same rate that cars do? Should trucking for business logistics be stuck with all of the liability for road maintenance? There are so many questions regarding the equitable distribution of taxes, but there is no question that cities and counties responsible for road maintenance are feeling the effects of the shortfall in tax revenues. . Jay Friedland (Plug In America 's legislative director) has remarked that several states are imposing special fees on electric cars and hybrids. It will be interesting to see how manufacturers of electric vehicles and other business advocates for sustainable transportation respond to the intent to raise taxes or fees for those opting for "the high road" with respect to energy consumption. Sources: " Bicyclists and hybrid drivers should pay more taxes ,"by Queena Kim, Marketplace--American Public Media, December 31, 2013. Follow up: Do you think bicyclists should pay more taxes? Why or why not? What about drivers of hybrid vehicles? Are you a cyclist or hybrid-driver? Does your own situation influence your opinion? If so, how could you use your own perspective to influence a marketing campaign, one way or the other with respect to energy-saving transportation alternatives?
  • Bitcoin Explained

    The five-year birthday for Bitcoin is January 3rd, 2014. Bitcoin's "daddy" is a group of hackers named "Satoshi Nakamoto." Five years ago "Nakamoto" set up the currency to be outside of any government's control. Bitcoin's software is set up to allow anonymous currency transactions. According to the explanatory essay that accompanied the currency's launch, bitcoin's purposes included: a protest against the government-controlled currency values that could be undercut by the issuance of an unlimited number of currency units easing the transfer of funds globally, directly from individual to individual empowering smaller economies avoiding transfer fees from near-monopolies like Western Union, or bank wire transfer fees allowing private transactions--sometimes involving products that are normally regulated by governments, such as weapons and drugs. Many libertarians were attracted to the independent-of-government aspects of bitcoin. And some financiers have invested in bitcoin as they might hedge investments in any "foreign" currency. But to bitcoin enthusiasts, such as Elizabeth Ploshay, bitcoin not just money, it's "a movement." Tradehill co-founder Ryan Singer has opined that just as email supplanted snail-mail...bitcoin will supplant traditional banking. One source of information for those wishing to keep up with this rapidly changing currency platform is Bitcoin magazine, which has the stated mission to be “the most accurate and up-to-date source of information, news and commentary about bitcoin.” Source: " The Bitcoin Ideology, " by Alan Feuer, the New York Times, December 14, 2013. Follow up: Have you been involved in a bitcoin transaction? Do you have an account? What do you see as the plusses and minuses of this online currency? Would you consider "investing" in bitcoin? Why or why not? What does "P2P" mean?
  • Permanent economic slump is the new business as usual

    image from www.pressdemocrat.com Is the depressed economy the new normal? So it seems. The new term used to describe this depressed economy is: "secular stagnation". It is being used to describe "a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between ," Lawrence Summers spoke at a the International Monetary Fund's (IMF) most recent research conference, and he made the point that the markers that created the financial crisis of 2008 are in the past...but our economy has not yet recovered. Summers made the point that mild depression is the new normal. He suggested that there was not significant pressure to move beyond this lukewarm state. Paul Krugman has some additional tidbits that reinforce this point: Household debt relative to income: While it was stable from 1960 to 1985, it rose a lot through 2007 (when the financial crisis hit). Nevertheless, this rise in debt did not boost the economy. brief periods of prosperity occur only due to bubbles and rampant but unsustainable borrowing. underlying this might be slowed population growth, but even the baby boomer secondary boom did little to spur the kind of growth the initial boom seemed to trigger. Fewer kids mean fewer new households, which inhibits housing growth, a major driver of our economy. trade deficits with other countries make things worse. Without compelling evidence indicating otherwise, it seems that this slump is the new normal. Source: " A Permanent Slump?, " by Paul Krugman, New York Times, November 18, 2013. Follow up: What do you think? Is economic stagnation the new normal? What are the pros and cons?
  • $10.10 national minimum wage a possibility

    image from thinkprogress.org Representative George Miller and Senator Tom Harkin introduced a bill earlier this year to increase the federal minimum wage $10.10 per hour. (This works out to $20,200 annually for full time work.) Currently the national minimum wage is $7.25 ($14,500 a year). The news at this point is that the White House is now making the passage of this bill a priority. Small businesses often oppose increases to the minimum wage, so a coalition of politicians has made the bill more palatable by phasing in the increase over two years, and allowing a special break of up to $500,000 in expansion investments to be fully deductible. Ironically, it is the largest employers (e.g. Walmart) that benefit most from a lower minimum wage. And it is the U.S. taxpayer that foots the bill in support services to families of the working poor. A minimum wage of $14,500 per year for full time work still leaves families under the poverty level. (The national poverty level for a family of four is $23,550 in 2013...and the new minimum wage would still generate less). Representative George Miller, left, and Senator Tom Harkin Image taken by Bill Clark, CQ Roll Call for Getty Images Source: " $10 Minimum Wage Proposal Has Growing Support From White House " by Catherine Campell and Steven Greenhouse, New York Times , November 6, 2013. Follow up: What is your current wage or salary rate? What is the minimum hourly wage you'd imagine would support a decent lifestyle in your city or town? What effect does the minimum wage have on the economy? List the positives and negatives.
  • Fed announces plan to continue economic stimulus

    image from www.newstimes.com The Federal Reserve announced Wednesday that it would continue its economic stimulus program--that is, it would keep buying $85 billion of Treasury and mortgage-backed securities each month. It also planned to keep the short term interest rates near zero. The purpose of this program is to stimulate hiring and investment, and to keep the economy moving. Ironically, the market responded by by losing ground--the Dow Jones average dropped over 61 points. Nevertheless, the Fed does not intend to stop its stimulus program any time soon...not until at least March of 2014. The term of Ben Bernanke, Chairman of the Federal Reserve Board , ends in February. cartoon from the New Yorker , Oct 7, 2013 Source: " Market Slips as Economic Stimulus Goes On ," by the Associated Press, via the New York Times , October 30, 2013. Follow up: What is the purpose or function of the Federal Reserve Board? What is the current controversy surrounding the possible future Chairperson, Janet Yellen?
  • Economics explained...on YouTube

    [View:http://community.cengage.com/GECResource/themes/g ew/utility/ :550:0] Bridgewater's posting of the video Ray Dalio --a billionaire hedge-fund manager of Bridgewater--has made a video that explains the economy. It is pretty practical, and describes the economy in a mechanistic, cause-and-effect way. Says Dalio: “ While I kept it confidential until recently, I now want to share it because I believe that it could be very helpful in reducing big economic blunders, if it was more broadly understood, I believe that most influential decision makers and most people cause a lot of needless economic suffering because they are missing the fundamentals." Ray Dalio is not a typical economist--he disagrees with the monetary policy espoused by Milton Freeman, and does not think that the economy can be controlled by influencing the money supply. [ According to the Street.com , “M is the money supply; V is velocity — the number of times per year the average dollar is spent; P is prices of goods and services; and Q is quantity of goods and services. The equation suggests that if V is constant and M is increasing, there must be an increase in either Q or P.” ] Ray Dalio is not the only original thinker who has been posting his economic theories on YouTube. For those of you interested in the economics of the recent government shutdown, and its part in the economic cycle, I have provided another YouTube video. Listening to both of the videos can be quite a concise economics education. One may be more effective than the other: you be the judge. Source: " Government Shutdown Explained ," by Casey X., YouTube, October 12, 2013. " Economic Theory, Via YouTube and Cartoon, " by Andrew Ross Sorkin, New York Times Dealbook , October 22, 2013. Follow up: According to Dalio, what is the most important part of the economy? Why? Who do think more credibly explains of the economy--Dalio or Casey X.? Explain the plusses and minuses of each lecturer's approach. Explain the debt-swing cycles described by Dalio. If Ray Dalio were your advisor, what economic policy would you embrace, if you were being considered (as is Janet Yellin) for a position as the head of the Federal Reserve?
  • Who benefits from the government shutdown?

    image from www.newsers.com...Invasive bugs might slip through because of fewer inspections... Since the government shutdown on October 1, and the looming possibility of the United States defaulting on its U.S. Treasury debt, financial analysts have been pondering who might lose money and who might make money from this debacle. The holders of the debt (China and Japan, for example, hold more than $2.4 trillion) would be among the losers. Who would be the winners? For starters, maybe large investment banks would win. Citibank gamed European debt to their own advantage back in 2004. In August of that year, "Citigroup sold €11 billion of eurozone government bonds in less than two minutes and 30 minutes later bought back €4 billion at lower prices to pocket a profit of €17 million ($23 million)." But today's markets are complicated by "credit default swaps"--derivative instruments that hedge the risk of owning debt. Buying this "insurance" means that you not only can make money if there is an actual default, but you can also make money when the price of this protection goes up. And the price of this protection goes up when there are threats by people in positions of government power that they might force the default to occur. In other words, entities have already made money over the last few weeks in the credit default swap business. But just as it is impossible to know how much life insurance or homeowner's insurance or car insurance a person has, it is impossible to know the size of the market in these "insurance"-type instruments. What a difference it would make if financial markets were more transparent. Source: " President Obama Might Ask Who Benefits From U.S. Debt Default " by Janet Tavakoli, Huffington Post, October 9, 2013. Follow up: Read about several other types of businesses that might profit from a U.S. debt default in this article from Mother Jones magazine . Which seem most likely to succeed?
  • electric vs. gas: cost/benefit marketing

    image from sustainableamerica.com Sustainable America is marketing the idea of using electric cars rather than gasoline powered vehicles. The numbers make good sense. It is interesting to note where in the U.S. financial differences are greatest. Still, there are other preconceptions that present marketing hurdles for proponents of electric-powered cars. Source: " Hippies Must Have Tampered With These Numbers, Right? " by Carolyn Silveira, Upworthy.com and Sustainable America.com, October, 2013. Follow up: What percentage of your monthly income do you spend on gasoline? If you had an electric car, using these figures, how much would you save? Does "range anxiety" prevent you from going electric? Would you consider an electric vehicle with a gasoline back-up, such as a Plug in Prius or a Chevy Volt? What are the other marketing hurdles for electric vehicles, and can they be overcome?
  • Silk Road cyber "black market" shutdown

    website of Silk Road, as of October 3, 2013. Silk Road --a website that has been described as an "eBay" for anonymous "black market" transactions--was shut down this month by the FBI. Silk Road's creator, Ross Ulbrecht, was also arrested. Silk Road's online commercial offerings included over 13,000 offers to sell controlled substances. Recently, too, an offer of about $250,000 in bitcoin was made for a murder-for-hire. Of course, these are illegal transactions. Part of Silk Road's website services included training on how to stay anonymous online, and how to negotiate transactions in bitcoin. Observers noted that if Ross Ulbrecht had followed his own advice, he probably wouldn't have gotten caught. Additionally, market watchers are curious to see what impact Silk Road's shutdown will have on bitcoin , since about 50% of bitcoin transactions have occurred on Silk Road. Sources: " Silk Road Hits Bump Along the Way ," audio interview by Ben Johnson and Brian Krebs, Marketplace, American Public Media, October 3, 2013. Follow up: What is the "black market"? How do the principles of capitalism apply to the black market? What is "bitcoin"? How does it derive its value? How is it the same and how is it different from other currencies?
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