Show me the money!
By Jason Bowen

"Off the precipice into the abyss of ignorance." To anyone having taken Economics 101 with Dr. George Gillen, these words will sound familiar. He uses this phrase to refer to anyone who is ignorant, specifically to those illiterate in economics. Unfortunately, this group includes many Americans.

With the recent Enron scandal, K-mart's bankruptcy and the Toys R Us closing of several hundred stores, it would appear that America is struggling economically. But exactly what is the nation's economic prognosis?

Before getting down to the nitty gritty, there are several economic terms one must be familiar with. The first term is "depression." A depression in the economic sense is not something to rush to the cabinet for Prozac about. A depression is a period of low general economic activity associated with high levels of unemployment.

Another term that will prove useful is "recession." A recession is similar to a depression but less extreme. A recession is simply a period of reduced economic activity.

Inflation is also an important economic concept. This is when an increase in the volume of money results in an increase in the general price of goods and services. Or when more printed money raises the price of a loaf of bread or a haircut.

So, where does America fit in all this? The U.S. is obviously not in a depression; neither is it in an inflationary period. According to Federal Reserve Board Chairman Alan Greenspan, America is coming out of a period of recession.

However, retail sales increased only fractionally in the month of February and little real evidence of a recovery has been seen.

What factors have led to this? Many say the September 11th attacks are responsible. President George Bush said, "There's no question our economy was hurt by the September 11 attacks."

Since that date, airlines have lost millions; major businesses including Ford, K-Mart and Toys R Us have laid off thousands of workers and there has been a general economic slowdown. People have been spending less.

The government has several options to fight depression, recession and inflation. The main way it fights inflation is to sell bonds. A bond is simply a loan to the government, which in turn guarantees repayment of the original investment plus interest by a specified date.

The government sells bonds, lowering the amount of money available. This money then "sits" for a period of time.

Buying bonds is also an option to fight depression and recession. But the most common way to combat an economic downturn is to lower taxes. This act is called "priming the pump," giving consumers more money to spend.

Within the past several months, Bush has introduced tax cuts in an attempt to put more money into people's hands. While these tax cuts seem good, the government's main focus will be to give tax breaks to major businesses. In actuality this will help the economy very little because businesses typically save money and not spend it.

Despite this fact, Greenspan reported that an economic recovery is underway. Even though America has been going through a recession, the country's people have continued in their tradition of strong spending.

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