econsalon: Macro question 2/24

econsalon: Macro question 2/24: "Find the CPI number for the year you were born. What was it? What base year did it reference? How much inflation have we had since then?"

I was born in 1970 and the average CPI that year was 38.8. I do not understand what base year it referenced, the list was bunched with the years 1966-1970, unclear as how it is presented. To find out how much inflation we have had compared to today's CPI, one uses the following formula:

given year (221 cpi -2011)/ base year (38.8 cpi - 1970) X 100 - 100 (cpi base) = % of increased CPI

Utilizing 1970 CPI data: 221/38.8 = 5.69 X 100 = 569.58 - 100 = 469.58%

Since 1970 inflation has gone up by 469.58%. It sounds ridiculous and inaccurate but the formulas proves this immense increase.

econsalon: Macro Questions 2/7/11

econsalon: Macro Questions 2/7/11: "What was the single most important thing you learned from watching the short film 'The Crisis of Credit'?"

The single most important thing I learned from watching "The Crisis of Credit" is the greed and voraciousness of the investment bankers and lenders in concocting and approving sub-prime loans (the lenders) so those investments can carry the "risk" factor. To go out of SOP to tweak a system that is producing great rewards to lenders and bankers to begin with in such an irresponsible and gluttonous manner was eye opening and depressing. Anger also, anger at the greed and incredibly uncalculated credit and financial decisions that has affected so many Americans; many fiscally responsible Americans. Apart from the very expensive and cruel lesson which emerged from this crisis as far as increasing federal regulations and "eyes" watching the financial sector among other improvements and legislation, the most important thing I learned (and hope others have too) is the capacity money has to influence most humans, and what capacity ALOT of money has in corrupting and ruining others for personal gains. Greed and money and corruption go hand in hand, but the amount of fervor and methods utilized to bring the American economy to its knees by a sector of slimy pigs is spectacular in its selfishness and destructiveness.

econsalon: Macro Question: February 2nd

econsalon: Macro Question: February 2nd: "How would you explain the concept of diminishing marginal productivity of capital to a 5th grader? (Remember: 5th graders are pretty smart..."

I would explain the concept of diminishing marginal productivity of capital to a 5th grader in terms of a sand castle. If you want to build a sand castle in your playground sandbox you collect and pile up all the sand that is possible in the sandbox and begin to build. As the castle takes shape (and it is taking shape nicely) you decide you want more sand to keep building and expanding the castle, which is attracting onlookers. You decide to go to the playground next door and take sand from that sand box to make your castle even bigger, to please the swelling onlookers and admirers. You manage to collect an additional three buckets of sand to continue building and expanding your castle. The castle is looking great, getting better, bigger, and attracting even a larger crowd of playground onlookers. You decide to add more sand to make the castle even bigger, so you go get three more buckets of sand. Only, when you return to the sandbox, you realize you are running out of room to expand and increase the castle and production and building begin to decrease, along with the onlookers. There is just no more room in the sand box for more sand to continue production and expand the castle. All that sand that you labored to dig out, transport, and deliver, was all for not since that sand is now useless to continue building. Sure the castle was shaping out great, getting bigger and better with every bucket of sand, but as more and more sand was brought in to expand the castle, the limit of what the sandbox could hold was reached, and no remaining amount of sand could alleviate that. As a matter of fact, the construction and building of the castle slowed then decreased completely causing the interested onlookers to disperse. This simple explanation might help a 5th grader understand the concept diminishing marginal productivity when an input is increased in a fixed unit, where initial increases in marginal gains are attained but in time the increase in productivity diminishes; even into the negative possibly.