A Theory Disproven. A Few Billion Dollars Misspent. A Country in a Crisis.

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Social ills are rampant in parts of America.  As seen in The Wire, our country has high rates of crime.  Noticing this, spending to combat this problem increased dramatically.  From 1987 to 2007, the year of the advent of the current recession, federal spending on corrections rose an inflation-adjusted 127%.  Furthermore, total state general fund expenditures on corrections rose 315%.  In trying to rid our country of one problem, we contributed to the creation of a massive other one – a deep financial recession.

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Learning About Household Leverage (no, not the popular TNT drama series)

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When asked to investigate the economic recession of 2007, I was really at a loss for inspiration.  The financial crisis was something that I really did not know much about.  However, one thing I did know is that the housing bubble burst and at least partially caused the recession.  So I began my educational journey by learning about household leverage and the housing bubble. Continue reading

Enron on Broadway: Maybe Lay, Skilling, and The Gang Will Have More Success on Stage…

A scene from the hit play "Enron" at the Noel Coward Theater in London.

Apparently not much has changed since Enron’s bankruptcy and fraud ridden collapse in 2002.  It’s eight years later and Enron is still spending loads of money on new ventures of uncertain profitability.  However, this time the organization will actually have to earn its revenues by pleasing consumers on Broadway.

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What the H*&##*!&! Happened to the Economy?

Here are the initial questions you all were interested in learning more about.  (PS, note that this is the first use of the “What is Going On”category which is different from our blog posts about organization theory.

  • What was the role of derivatives and securitization of risk-related products? (What is a risk-related product?  Do you mean securitization of risk?)
  • Why do companies put so much emphasis on share price?  Did that lead to misleading financial statements and the collapse of firms?
    Same person: Did consumer patterns in US influence this recession?
  • How can housing bubble issues be changed for the future to prevent problems?
  • I would like to know if there have been any new regulations that banks must abide by when giving out loans or if these policies remain the same.
  • What exactly determined which financial organizations received bail outs over others?
  • What were some of the first signs and in noticing these, what could have been done as far as organizations getting involved?
  • I would like to know who got hit the hardest?
  • I would like to better understand the recession in relation to past recessions.
  • Creation of the banks’ incentive system for loans given out (by managers).  Why?  How was it meant to function? [I think you mean how was the incentive system put in place by mangers supposed to function?]

Same author: Or the logic of the political decision to make banks give loans to people who would not normally qualify.  { I think you mean either the Community Reinvestment Act and/or the role of Freddie and Fannie Mac?  Otherwise, how did a political decision drive loan practices?]

  • I want to know more about why there so few regulations about trading derivatives and others [other what?]  Also, if there were regulations, why did everyone look the other way?
  • What else caused the collapse besides the sub prime mortgages?
  • What regulations expired to allow this to happen and what regulation will be placed in the future to stop a recurrence?

Where was the home of the DoDo Bird??

If you are wise enough to know about this extinct flightless phenomenon, you would know that it was confined to the island of Mauritius! I was lucky enough to spend a day in Mauritius last spring. Mauritius is a very small country located off the coast of Madagascar. It is a very unique place for a variety of reasons. First of all, Mauritius is well-known for being a very multi-racial country. A history of slave trades from Africa and India, in addition to vast and varied immigration movements, has made the Mauritian people nearly indistinguishable from an ethnical standpoint. European, Indian, African and Chinese influences are the most prominent, but decades of intermarriages have created a unique breed of people. Census commissioners struggle to classify the ethnic diversity of the nation. Most citizens are completely unaware of their heritage and background. The United States is another nation that is considered multi-racial, but when one is asked for his background/heritage, he is likely to know where his family descended from prior to immigrating to the U.S. The lack of identity amongst the Mauritian people makes it a very unique culture to study, albeit a very frustrating culture for census commissioners.

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Chilean Earthquake spurs Economic Growth???

Just about seven short weeks after the devastating 7.0 magnitude earthquake hit Haiti, plate tectonics turned upon Chile with one of the world’s largest quakes since 1900.  This monster of an 8.8 magnitude, along with the subsequent tidal wave that washed along the south-central coast of Chile, have caused upwards of 800 deaths so far with about 1,000 people still missing along the coastal region.  As devastating as this is, the total death toll in Chile will fall a couple hundred thousand people short of the Haiti earthquake mostly because of the different poverty levels.  Continue reading

Latin American Wonders and Problems

As a Latin American person, Modern Latin America was a book that instantly caught my eye.  This book offers a picture of Latin American society, not just random facts. The authors, Thomas E. Skidmore, Peter H. Smith, and James N. Green did a superb job in tracing back patterns and trends to understand the complexities and variations in Latin American countries and their possible futures. A part from devoting various chapters to all countries in the region, the authors talk about politics and policy, economic growth, and social change. Continue reading