Campus News

Economics majors discuss the economy

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Countless news stories covering the ups and downs of the stock market and job losses have been burnt into the mind of every American for more than a year. Everyone has felt the effects of the current recession, including college students with the fear of finding a job in the next few years. Many wonder when it will end and what will things be like when it’s truly over. “In a free market system, cycles are natural,” said sophomore economics major, Neil Silveus. “Recessions are kind of like forest fires. It can actually be a healthy thing for the system. The damages of a forest fire can be relieved and contained. That is why the government steps in to help regulate during recession. But too much involvement really messes with the natural course of things.” According to Dr. Aaron Schavey, assistant professor of economics, the Federal Reserve is to blame for the bad economy. He said it kept interest rates too low for too long and put too much money into the economy. Schavey said another contributing factor was the distribution of loans. “The banks were too relaxed in lending standards,” said Schavey. “In the past you would have to put down a 20 percent down payment, but now some people don’t need to put anything down.” Sophomore Eric Brown, economics finance major, agrees with Schavey. “Housing prices were way too high, which caused people to take out higher loans than they could afford,” he said. “These loans are considered risky loans by banks but they did them anyway because they were profitable. When the prices tanked, banks had a huge number of people with housing loans that were considered risky. Banks got worried because they had a huge amount of money tied up in the housing market which no longer was worth as much. This caused banks to lose a lot of money and no longer be able or willing to make loans. Once the loans stopped it affected the rest of the economy because the rest of the economy needs the banks loaning to keep businesses growing.”  Senior business major Tyler Brown also thinks the banking system is the main contributing factor, but the problem is also the American lifestyle. “We spend more than we have and borrow what we cannot pay back,” said Tyler Brown. “It’s a never ending cycle of terrible decisions.” The current recession has been the worst the country has seen in many years, but it’s still nothing like the Great Depression. “In the Great Depression the unemployment rate was up to 25 percent and right now it is only at 10 percent,” said Schavey. “However, it is one of the more severe recessions since the Great Depression.” Silveus said in every situation like this there are going to be different opinions. “When one person loses something, another person gains something,” said Silveus. “It’s just how it is. There are two sides to every coin. Some people will say the economy isn’t bad because they aren’t seeing the effect, but then it’s hard to say that to the people who have lost their jobs and can’t find work.” Tyler Brown said he isn’t sure if the economy will ever get better. “Honestly it will never turn around completely,” he said. “We are human. We have flaws. That’s why we do not have a steady economy. We make dumb decisions and benefit on others misfortunes.” Even if that is true Schavey, Silveus and Eric Brown believe the economy is turning around, even if it is at a slow pace. “The economy has stopped contracting and begun to grow by many economic indicators,” Eric Brown said.  Schavey said the economy is starting to turn around and there is economic growth, but “if people define the recovery as the number of jobs created, then it is going to take a long time.” Even though there are some signs of recovery there are many opinions about how to turn things around more quickly. Schavey said he would cut corporate taxes, cut taxes on capital gains and dividend income, and get rid of the minimum wage. Both Eric Brown and Silveus said they would take the areas in which the government was in control and back off. Silveus fears all of the government funding will eventually cause inflation. “I tend to follow the thinking that many times less government intervention is better than more when it comes to the economy,” said Eric Brown. “The market will fix itself as downfalls have proven over time as needed in free markets. [The] reason being is it causes a return to focus on efficiency by consumers and businesses.”
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