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Why is there a need to study, write, and think about Economics? Economics is the study on the goods' and services' circulation - production, distribution and consumption. Also, Economic analysis has many applications in a wide range of fields such as business, finance, and government. Furthermore, it can also be applied in fields such as family, health, religion, science, politics, and many more.

                        In this paper, a series of economic journal articles was discussed briefly. A synopsis of each journal article below is to be discussed:

1.      "Cartelistic v. Competitive Free Market Capitalism", by Donald R. Bryne and Edward T. Derbin. Edited on March 18, 2008

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2.      "ONGOING CREDIT CRISIS / MORTGAGE MELTDOWN TOO BIG TO FAIL --- TOO SMALL TO MATTER", by Donald R. Bryne and Edward T. Derbin. Edited on March 21, 2008.

3.      "Excessive Subprime Lending; or Misguided Monetary Policy - A Reasoned Critique", Edited by Donald R. Bryne and Edward T. Derbin on August 27, 2008.

4.      "ENERGY, ENERGY, EVERYWHERE - BUT WHY DOES IT COST SO MUCH?", Edited by Donald R. Bryne and Edward T. Derbin on February 21, 2007.

5.      "THE RICH, THE POOR, AND THE WANNABEES: A Study of the Distribution of Income and Wealth of the United States of America.", Edited by Donald R. Bryne and Edward T. Derbin on November 18, 2006.

6.      "THE FEDERAL RESERVE: CONTINUED RESTRICTIVE MONETARY POLICY AND ITS FALLOUT.", Edited by Donald R. Bryne and Edward T. Derbin on January 6, 2006.

"Cartelistic v. Competitive Free Market Capitalism"

                        According to Bryne and Derbin (2008), comparison of Cartelistic Free Market Capitalism and the Competitive Free Market Capitalism is like that of the comparison of the two cities in the Charles Dickens' novel The Tale of Two Cities. Today, the best of times is the resources that are involved in the energy industry, suppliers of capital, labor and management. On the other hand, the worst of times is the UAW of the Automobile industries. Although there are differences in them, both of these industries are considered to be Free Market Capitalism.

                        Both industries are the same in the sense that both are governed by private sector companies, only a very little part of them are regulated by the government. However, in economic analysis, there are huge differences in these two industries. Be it microeconomics, or macroeconomics, they possess worlds of difference when talking about their impact on society. Research says, on the macroscale economic analysis, the Cartilistic FMC is observed to possess a characteristic of increasing severity and frequency of recession and inflation episodes, on (1947 - 1983) and (1965 - 1983) respectively. Moreover, the Competitive FMC is observed to possess a characteristic of decreasing severity frequency of recession and inflation episodes, on (1984 - 2008), and (1984 - 2008) respectively. Also, research says that, on a microscale economic analysis, the Cartilistic FMC violated equity and efficiency, which are economic welfare conditions that are needed to be satisfied.

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This implies that without competition, the cartels have the market power. On the other hand, the Competitive FMC fully satisfies the economic welfare conditions. Talking about equity, the income distribution is less unequal because monopoly power is not present. Talking about efficiency, the per capita standard of living is higher than what it can be if there is monopoly.


                        Finally, Competitive FMC ensures equity, as in the auto industry, the consumer surplus is steadily increasing. It ensures efficiency, such that, as the competition increases, the real per capita GDP increases. Moreover, if the Competition is at its maximum possible level, the possible GDP is also maximized.

"The Fed and the Collapse of the Mortgage Market"

                        According to Bryne and Derbin (2008), there are three causes that lead to the collapse of the mortgage market in the year 2000. First, it is the series of tax increases in the beginning of 1990's through the rest of the decade. To eliminate Federal budgetary deficit and achieve other ideological goals, the Fed deficit was replaced "with the economic restraint of a growing Federal budgetary surplus approaching $120 billion by the collapse in the third quarter of 2000, not 2001." Second, there was a rapid increase in the trade deficit. As a response to the coming inflation, possibly a hyperinflation, Fed tried to combat a cost-push inflation pressures by stemming for the two oil shocks in 1973 and 1978. It was seen that the Fed is ill-equipped in terms of coping up with cost-push type variety of inflation because economic costs of monetary restraints are much greater compared to that of a demand pull variety. Third is the adoption of the Fed's anti-inflationary policy. They slowed down the growing money and credit aspects.

                        Cost-push type of inflation pressure originated from the specific sectors in the economy - such as wage rates, and raw materials. It is the reduction in overall supply that causes an overall rise in prices. On the other hand, Demand-pull type of inflation pressure is the rise in the overall demand that causes rise in overall prices.

                        Revisiting the steps taken by Fed to ease the cost-push inflation pressure in 1970's and 80's, Fed pursued a high inflation rate strategy from 1973 to 1979, to avoid an even higher unemployment rate.

                        Finally, it was seen that the mortgage crisis was not caused by the subprime loans, but because of the monetary policies adopted by Fed. Subprime is the term used to characterize an individual borrower. A subprime borrower is the one who has a weak credit history, such as those people who have payment delinquencies, bankruptcies, etc.

"Excessive Subprime Lending; or Misguided Monetary Policy - A Reasoned Critique"

                        There are two major problems in the monetary policy.

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One, Fed was unable to realize that the gradual but significant landscape changes in the economy made the economic analysis dependent on the micro-scale. Two, there is a lack of understanding that the monetary policies affect the economy and causes collateral damage.


                        The problems with the mortgage industry are that first, the financial institutions relied on short-term funds to supply to their long-term mortgages. This incident lead to the continuous and significant rise in the cost of funds, while the income on the interest of their long-term mortgages came very slow. This caused the drop of their interest rate margins and their net profit margins. Second, Fed's use of a short-term interest rate due to monetary constraints caused the rise of the short-term interest rates that is higher than the inflation rate. Due to the high Fed funds rate, the foreclosure rates increased significantly.

                        Fed was found to be not successful in easing the cost-push inflation pressure. It was seen as in there were two oil shocks in 1970. Also, there was an engineered collapse in the economy in 1980 to 1982. Furthermore, it was observed that the heart of the problem was not subprime, but it was variable in nature.

                        Finally, the reason behind the rising number of delinquencies and foreclosure rates was due to the continuous increase in the monthly mortgage payments. The restrictive Federal Reserve monetary policies caused the collateral damages.


                        "One thing the world does not lack is the ability to produce lots of energy.  Despite the pessimism, there are plenty of fossil fuels and non-fossil fuels; many of which are renewable and will help us to generate much more energy than we are currently producing.", says Bryne and Derbin.  According to the Energy Information Administration, US produce 70 percent of its own energy. It imports for about 34.5 percent. It exports for about 4.5 percent. And that, the total energy consumption of US is 100 Quadrillion Btu in the year 2005.

                        Monopolist's power was examined, starting from the OPEC, to the domestic producers, to the environmentalist's point of view. The OPEC believes that they are only addressing the addiction of the Americans to oil - this is to increase their profits and revenues. Second, they claim that the world's reserves are limited and that they are doing the best that they can - this is also to increase their profits and revenues. For the domestic producers, they are the victims of the world price of crude oil, thus they do not explore and exploit oil sources for them to have a justification not to decrease profits and revenues because there is "limited" resources. Also, they justify their points by using the environmentalists' point of view to not build refineries. Thus, there will be less supply, and then prices will remain high and will not decrease.

                        The government should try to exploit our own oil resources to be able to achieve the following: to be able to cut trade deficit by at least 1/3; to be able to increase GDP growth as it is known that imported oil reduces it by 1 to 2 percent; lastly, to be able to save lives and funds - as it defunding terrorist organizations.

"The Income Distribution: Where's the Cash?"

                        According to the US Census Bureau, Income Distribution is the division of the population into households. Then comes the division of these households according to their respective incomes. The Census Bureau produces different estimates of poverty. This is based on the 15 different definitions of income. Also, there is a difference between relative and absolute poverty. Furthermore, a study on the lifetime averages versus the annual estimate of incomes for a person is produced. There is an article that described the situation of the rich and the poor by saying that: the poor continues to become poorer, and the rich grows richer.

                        A study on the relationship of income and education was conducted. The results were very clear that education and income are highly correlated to each other. This result can be proven because; it is a fact that people who are educated are the ones who get jobs. Those who are not educated, do not have proper jobs or they just have nothing.

                        Another relationship that was studied was that of savings and income. Obviously, they are correlated. When people have a high generation of income, the higher is the probability that they can save money. Also, it is trivial that those who does not have any income, cannot save money.

            The importance of studying income and its relationship to other economic aspects is that it will help in the economic analysis of a country. If taken with serious steps to improvement, it may increase the GDP of a country.

"The Killing Fields: Weak links in an otherwise strong economy"

                        The US economy destabilized in 1999 and collapsed in 2000. It was seen that the steady strength in the government can be described through the solid job growth and an unemployment rate of 5 percent. Also, it was fortunate that the economy was able to sustain itself despite of two consecutive strong hurricanes, one of which was Katrina. Katrina alone devastated $100 billion and also the cost of the ongoing wars in Iraq and Afghanistan.

                        The weak links that were seen to be affecting a supposedly strong economy like that of the US are the following: Auto and education restructuring, energy costs, rising mortgage interest rates, and trade deficits.


                        As it was discussed in the previous journals about the auto industry that is dying, the need for reconstruction is urgent. Also, because of the correlation of income and education, the education system is to be reconstructed to produce better graduates. Moreover, the Fed's attempt to slow down the economy promotes massive trade deficits that depress the economy.

                        According to Bryne and Derbin (2008), the Fed's policies were seen to be benefiting other nations that desire to run trade surpluses. Also, it benefits foreign companies that own public and private short-term securities. Lastly, it benefits financial services industries that are involved in residential mortgage financing. On the other hand, there are still sectors that are not benefitting from their policies. These are the households (because of higher interest rates in mortgages). American companies which are unable to export because of the strong dollar. Lastly, Job losses because of the inability to export.

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