Health is the new wealth, but the two are far from mutually exclusive. From clothing to food to hobby trends–wellness is something to aspire to and is correlated to status. Whether it is sporting the newest athleisure brand, the new diet fad that is organic, vegan, free of toxins, and packed with micro and macronutrients, or paying upwards of $30 per workout class–being healthy is elite. According to the Global Wellness Institute, wellness expenditures ($4.2 trillion) are now more than half as large as total global health expenditures ($7.3 trillion), and businesses are catching on. They have capitalized off of early trends, and the wellness industry has grown about 13% in a short two years from 2015-2017 (GWI).  

If you are familiar with basic economic principles and the rules of supply and demand, the increased popularity surrounding healthy foods sent prices flying high for everyone involved, thus making them more exclusive. Access to healthy food should be a basic right–instead, it is cheaper to get a full meal from a fast food stop than to have fresh vegetables at dinner. There is no shortage of food in the United States. 50% of produce in the United States is thrown away each year–some 60 million tons (or $160 billion) (The Atlantic). Yet 13% of the country’s population lives in a food-insecure household, meaning that they do not have full access or ability to purchase healthy foods (Medium.com). This leads to a large population experiencing malnutrition–whether that means hunger or obesity, it impacts more than just those directly involved. 

Although the obesity epidemic in the United States falls across all socioeconomic status’, there is a concentration of food insecurity in lower socioeconomic status. The high demand and limited access to healthy foods is a huge reason to blame for obesity and its correlation to lower socio-economic status. “More than 23 million Americans, including 6.5 million children, live in low-income urban and rural neighborhoods that are more than a mile from a supermarket. These communities are known as “food deserts” since they lack access to affordable, nutritious food. Lack of access is one reason why many children are not eating recommended levels of fruits, vegetables, and whole grains.”(Letsmove.gov). Low-income neighborhoods offered greater access to food sources that promote unhealthy eating. The distribution of fast-food outlets and convenience stores differ by the racial/ethnic characteristics of the neighborhood (NCBI). Rather than presenting these communities with nutritious and energizing food, they are presented with options that have an adverse effect. 

Food fuels you with energy to perform at one’s potential, but fast food does the opposite. It causes health issues–primarily obesity. Obesity is related to some of the leading causes of death, including heart disease, some cancers, stroke, and type 2 diabetes (PRB.org). Obesity is a grave public health threat, and accounts for 18 percent of deaths among Americans (Commonwealthfund.org). These health issues naturally lead to higher health care costs and create a cyclical trap where people are stuck in a cycle of poor eating because of the food they can access. 

Introducing poor eating habits from a young age teaches children and instills the pattern for the rest of their life. The cycle of poor eating habits and bad health negatively impacts them as well as communities at large. Without the ability to perform at one’s full potential, it can lead to reduced economic productivity. According to a study, obesity “costs the nation over $8 billion per year in lost productivity” (Yale.edu).
Despite the thriving U.S. weight-loss market (worth $66 billion in 2017), (Webwire.com) we need a long term sustainable option. The diet industry commodifies and glamorizes health and wellness when in reality it should simply be accessible to all. Health is not something that should be a fleeting trend, but the exclusivity factor in conjunction with our farming techniques, our country is headed into a serious health crisis. To have a prosperous next generation, it is important to invest in the health of all communities for a better future together.

Just a couple days ago, on September 18, the Federal Reserve dropped interest rates by a quarter point. This is the second time the Fed cut rates in 2019 as an effort to encourage businesses to take out loans to hire more people leading to expansion and to boost economic activity by encouraging people to take out loans and use that money to spend and invest. This boosted economy means all is well and a recession can be avoided as long as people keep spending. With low rates, it is easier to borrow money and encourages more spending and investing. So, why aren’t people spending more? The perception of a soon-to-come recession.  

            “The Federal Reserve should get our interest rates to down to ZERO, or less, and we should then start to refinance our debt… A once in a lifetime opportunity that we are missing because of boneheads,” tweets the President of the United States. When the current sitting president calls the head of the Federal Reserve, who he appointed, a “bonehead,” it does not instill any sort of confidence in American people that our economy is stable and growing. Unsurprisingly, it has the very opposite effect. People are fearful of a potential recession. It has been over 10 years since our economy’s last big recession and people seem to believe that we are due for another. As a result of this fear, people are ultra-conscious of their spending habits and make even more of an effort to save money. Saving money might be great for people’s pockets, but it does not contribute to boosting economic growth. Less spending can lead to a slowdown in the economy and as a result, the recession.

Some economic indicators reveal the reality of the U.S. consumer. What retail spending, worker pay, and household spending show is that a consumer in the United States is still financially healthy. The supposed coming recession is not supported by these economic indicators but is instead backed by the public perception that our economy is due for downturn.

Had the Federal Reserve listened to President Trump’s suggestions, the public would likely have been even more fearful of oncoming doom. To conform would show weakness in our central banking system. If the Federal Reserve did cut interest rates to zero, like suggested, there would likely be even more of a panic that the recession is imminent. The Federal Reserve made a decision independent of the president which is critical in maintaining the mysterious reputation and its ability to create money and to withdraw money from the economy. If they acted as the president suggested they should, the public perception would shift to distrust in the central bank, and ultimately an even more problematic idea of the potential recession.

To avoid the recession people strongly believe is overdue, people must borrow money to spend which will contribute to economic growth. The health of our economy is now reliant on whether people respond to the lowered interest rates and to the encouragement to spend and invest. The recession is not a guarantee, and people should take individual action to make sure they add value to a growing economy.

On September 18th, California Assembly Bill 5 (AB5) was signed into law. Its effects will be felt most strongly in the gig economy, where many don’t feel great about it. The basic premise of California AB5 is to define the law what constitutes independent contracting and what circumstances make workers full employees with benefits (such as minimum hourly wage and compensation plans).  

Lyft, Uber, Postmates, and DoorDash are the companies where the most workers will be affected.  Hundreds of thousands of drivers (alongside thousands at other companies in this gig economy space) will now be considered employees. Full time drivers are in for a somewhat good change, as they will receive positive benefits but are also now committing themselves to businesses that were designed to profit off of independent contractors. According to a Lyft driver interviewed in a recent report in the Wall Street Journal, ride rates have decreased by about 50% in the past four years. The cost of being a full-time driver is now higher and higher because they make near (and sometimes sub) minimum wage and have to pay the costs of keeping their vehicles in top shape at all times. In the chart below you can see how much California makes up of these companies profit streams. 

The people that AB5 affects most negatively are the part time drivers, as they now lose the flexibility of choosing when and how long they work in the face of being required and pushed to work more and more hours to make being a driver actually profitable. Expenses like gas, car repair, and giving up time at other part-time/independent professional endeavors will take a toll and force these drivers to either seek full time employment or move on to other pursuits. Other states will most likely follow the path California AB5 has set up, as gig economy corporations have grown sacel-wise at such a rate in usage and in contractors that labor laws must be passed to ensure the safety of full time workers. Adding the misfortune of drivers negatively affected by this bill is that they still have no control over what the pricing on rides is. Uber and Lyft can cut back pricing on rides as much as they want to accommodate the decrease in drivers on the street

Uber alone accounts for over 65% of the ride share market according to the Business of Apps journal. Even as their IPO this year did not go very well, they still stand as the juggernaut in the ride service arena, as seen in the Statista chart below. 

On the opposite consumer side of things, this bill will lower the amount of uber drivers on the street while demand keeps increasing, and according to the Wall Street Journal will make ride prices unstable. It will be interesting to see how this change affects the free shared rides agreement Lyft has with USC for a two mile radius around campus. Many students use it to get home safely each night, as this benefit activates after 7pm. It would not be unreasonable for the company to cease programs like this for the time being while their employee number will likely go through a shifting period. 

Sources: 

https://qz.com/1706754/california-senate-passes-ab5-to-turn-independent-contractors-into-employees/

https://www.latimes.com/california/story/2019-09-22/skelton-ab5-employment-law-independent-contractors-gig-economy

https://www.theatlas.com/charts/OffkCowSV

https://www.statista.com/chart/17261/lyft-vs-uber/

Uber Revenue and Usage Statistics (2019)

For those who earn more household income than qualified for Pell Grants but also make below the necessary means to bear the brunt of a costly higher education price tag, student loans are an attractive opportunity to finance an education. Christopher Ingraham for the Washington Post reported that American families carry more than $1.6 trillion in student debt or nearly 8 percent of national income. The number is striking, and it’s not going away any time soon. Since the 2000s, this figure has doubled, the Washington Post said.

With the pressure to earn a degree and an attractive promise of future opportunities, many bite the bullet and take out student loans. According to The Balance, the average U.S. graduate was straddled with over $39,400 in student debt in 2017. Some public service jobs and companies offer loan forgiveness opportunities for their employees, promising to pay off their worker’s college loans. Additionally, presidential candidates such as Bernie Sanders have expressed their plans to cancel student debt or make the cost of higher education free, making an attractive promise to those who understand the crippling weight of debt.

What are the implications of this financial burden? People are delaying marriage, investing less in small businesses, choosing not to buy homes and putting their income straight to paying off debt instead of saving for retirement, Ingraham said. And because of this, people aren’t spending as much money on goods and services. The Balance reported that individuals are less likely to seek out types of credit (like using credit cards or taking out car loans) because they are reluctant to borrow more money. As a result, lenders and banks receive less interest fees and slow spending affects businesses. 

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The real question, then, is if a college education is worth saddling piles of post-grad debt. CNBC referenced Twitter trends in which users encouraged other students to drop out of college because they claimed the student debt wasn’t worth it. 

Unfortunately, there is no clear answer because traditionally, a college degree is synonymous with upward mobility and higher earning potential. It’s almost universally acknowledged, in America at least, that to be competitive in the job market, having a bachelor’s degree is the baseline expectancy. 

Thirty-six percent of college graduates say their degree wasn’t worth it, according to CNBC, but experts say it’s still valuable. If basic economics centers around supply and demand, the demand for a college degree is higher than ever before, driving up the price of attaining one. Still, the solutions are bleak. The CNBC article says to avoid too much student debt, choose a more affordable college (advice that offers little solutions, in my humble opinion), and an author quoted in the piece says, “Don’t buy the typical advice that everyone seems to be throwing around these days saying college loans are the worst thing on earth. They’re not.” Still, delaying a family and withholding home-ownership sounds pretty rough to me. In the end, like most things, opportunities are a pay-to-play game and college is no exception with broader economic implications.

On Sept. 14, a major oil field, Khurais, and another major refinery, Abqaiq, owned by Saudi Arabia’s Aramco were attacked by drone missiles. Geo-politics aside, this led to an unprecedented, major disruption of 5 percent of the world’s energy supply. These two locations account for half of the kingdom’s total output. This equates to 5.7 millions barrels per day.

The price of oil on Sept. 13 was $54.85 dollars per barrel.

Here, the price of oil skyrocketed to $62.90 per barrel just after the attacks. A natural reaction to a sudden shock in a major source of the world’s energy supply.

The price of oil today has lowered to $57.29 per barrel. That is due to government reactions towards the attack which calmed the marketplace.

Saudi-Kuwait joint oil operations announced that they would return to full production very soon. Matter of fact, half of the disrupted output has been restored as Tuesday Sept. 17. Saudi Energy Minister, Prince Abdulaziz bin Salman, said that Aramco will be operating at a full capacity by the end of September. Also, the Saudi official said that the country would use oil supplies on-hand to keep markets leveled.

President Trump also aided in the oil-supply crisis. He authorized the release of the US’ Strategic Petroleum Reserve; furthering the stabilization of crude oil prices. The reserve is located in salt caverns beneath Louisiana and Texas and is the largest of its kind.

The Strategic Petroleum Reserve was established in 1975 by President Gerald Ford as a result of the Arab embargo of the time. This was part of the Energy Policy and Conservation act. The purpose of the Strategic Petroleum Reserve is to keep at least 90 days worth of oil in case crises (such as the embargo and current attacks) were to arise and cause a disruption.

The Dot Com Bubble is a fascinating foray into supply, demand, and tech hysteria. As the name suggests, the Bubble started as a wave of mass investment. Simply put, investors purchased shares of newly formed web-based companies. These investments were not necessarily prompted by sound business models or impressive sales, but simply because of the excitement surrounding the boom of the World Wide Web (WWW). I mean, at least one business had to succeed right?

Impressionable investors paid significantly more for WWW-based stocks than they were actually worth. As a result, initial public offerings (IPOs) were heavily inflated. For example, when Netscape Communications corporation made an IPO, it closed its stock at $58.25, valuing the company at $2.9 billion. Overall, the National Association of Securities Dealers Automated Quotations (NASDAQ) saw growth from 1995 where it had 1000 points to around 5000 points in 2000.

The eponymous Bubble itself came from the result of all these investments. The difference between the investor’s perceived value of a Dot Com company and the actual income generated from these companies created a market bubble. In short, colossal amounts of money being invested in web-based companies that couldn’t return the expectations created a system that was not sustainable. The bubble would eventually have to “pop”.

And early in March of 2000, the bubble did indeed finally burst. The NASDAQ has lost over two-thirds of its value near the end of 2002. Hundreds of web-based companies lost value, such as 360networks, Inc., Broadband Sports, and Freei. However, not all companies went defunct. Notable players in today’s industry survived the bubble burst. These include Amazon and Ebay, which were able to raise billions of dollars leading up to the bubble pop.

Today, new economic bubbles are emerging-  student loan debt, federal debt, and unfunded state pension liabilities. Time will tell if investors have learned their lesson, or if companies will become more creative in mystifying new industries.

Economic indicators give analysts clues to how future trends will likely behave. For example, a drop in purchases of diamond-based jewelry may imply that fewer Americans have the means to spend on luxury items.  Similarly, employment indicators offer economists signs of employment indicators could go either way and they don’t have to be tied to a recession relief; an increase in employment suggests a rise in consumer spending.

“But what about the beans?” no one but a legume connoisseur asked.

Among one of the more unusual economic indicators, no comma are baked beans and similar canned food items. The Baked Beans Index refers to a rise in consumer spending on canned goods. This suggests that the population turns to the salty alternative out of necessity, not preference. In times where fresh fruit and organic vegetables would be a luxury, such as recessions, baked beans allow for a filling meal for the common folk.

A look at the canned food industry suggests that, save for a dip in sales in 2016, there would have been slow but steady growth. The drop in canned goods purchases could be attributed to the after-effects of the Great Recession. Though the last major recession took place between the years of 2007-2009, the economy itself took time to stabilize.
Additionally, though the poorest people in the USA didn’t have far to  fall when it came to the quality of life, the middle and upper classes were affected the most. According to the U.S. Bureau of Economic Analysis, “real GDP fell $650 billion (4.3%) and did not recover its $15 trillion pre-recession level until Q3 2011.”

Most notably, unemployment rose to its highest at 10.0% in October 2009, and did not return to its pre-recession level of 4.7% until May 2016. Due to employment rates normalizing in 2016, it could be assumed people were making enough to be able to spend on “luxuries” like fresh food and veggies. Thus canned goods sales dropped dramatically. The spike in revenue growth for the fruit and vegetable processing industry shown in 2017 could be attributed to the settling normalcy of the job market. 

The above graph displays the fruit & vegetable markets in the USA, within the same time period as the first chart. The 3.19% decrease in canned fruits/vegetable sales corresponds with the revenue growth for fresh goods. In fact, market research firm IBIS World indicates that there was a 1.2% increase in fresh vegetable consumption in 2016. To put that into perspective, people in the US on average ate 640.29 lbs of fresh vegetables in 2016; people, by comparison, ate an average of 633.31 lbs of fresh vegetables in 2015. 

So take note: next time you buy fresh fruit over canned, be sure to savor it before another recession.

After being in a debt crisis since 2009, consumer confidence is at its highest level since 2000 and GDP is expected to have almost 2 percent growth following the fiscal year.

How did Greece’s debt crisis get even worse after 2015?

Back in 2015, Greece was still trying to move in a positive direction following an already six year debt crisis. So when the July elections of 2015 came around, the people believed they needed drastic change and elected Alexis Tsipras and his super “left-winged” Syriza party to try and move the economy forward for a change. Tsipras implemented corporate taxes, regulations on international trade, and tons of entitlement programs that the government could not pay for. All of these policies made the debt escalate further which created a major recession.

The Change in the Right Direction!

Greek citizens became extremely frustrated at the results of Tsipras and the Syriza party through their term, and earlier this year in the July elections opted to elect Kyriakos Mitsotakis, leader of the fiscally conservative “New Democracy” party. After years of different right and left-winged parties running the economy, Greece finally has returned to the two-party system that had them flourish in 2000. Many people worldwide were scared prior to the election that Greece would lean toward right-winged extremism”, but “The New Democracy” party beat out the right-winged “Golden Dawn” party to ensure that democracy is still alive and can flourish again in Greece. Mitsotakis did just that, reversing the socialist agenda that plagued the economy prior to his election. Mitsotakis has implemented corporate tax cuts, lifted restrictions on international trade, and limited entitlement programs within Greece since the government cannot afford it yet. He will continue to reform and work on these policies in the next couple of years as well. These policies are predicted to help the economy grow further and cause GDP to have 2 percent growth at the end of this fiscal year saw. Even though Mitsotakis has just been elected, many economists now believe the Greek economy is stable and will continue to get even better as the economy is at its best since 2000.

Returning to Normality!

Greece’s capital controls and restrictions are a thing of the past with Mitsotakis in office. Unemployment is still the biggest issue in the Greek economy, but it’s down to 17 percent from its peak at 28 percent in 2013. Granted, many Greek workers do not get fired, as discussed in class last week, so people of college-age or in their young 20’s have a hard job getting employed. That problem is not only an economical issue but a political one as well which makes it hard to judge Greece’s economy on that 17 percent unemployment. Because international trade does not have as many restrictions anymore, Greece is all of a sudden a player in the foreign market, which in the next couple of years will spur the economy to grow even more. Another policy Mitsotakis has implemented is the banks getting rid of “non-performing” or “bad” loans which is set to help grow the economy as well. Greece’s new finance minister Christos Staikouras plans to re-pay 3 billion of Greece’s 8.5 billion euro debt this year as well. All of these policies are not only moving the Greek economy forward but also preventing it from future crashes.

Sources: https://www.ft.com/content/c2c42066-d93c-11e9-8f9b-77216ebe1f17 https://tradingeconomics.com/greece/gdp-growth-annual https://www.southeusummit.com/europe/greece-marks-major-economic-milestone-in-advance-of-a-month-of-financial-planning/