The article:
http://ap.google.com/article/ALeqM5h5JRwPgiiw1s1OQ2nMg0svKpPEZwD939H3FG0
The value of gold in New York was briefly increased over $900 an ounce on Thursday, September 18th, 2008. The rapid increase in the price of this resource from Wednesday to Thursday was the largest one-day increase ever. Possibly the most important thing that resulted in this was the advantage the government took of this resource. The government recognized the opportunity to save their banks from the debt that has been following them for a while now. Although gold seemed to languish for a while, it recently proved to regain its valuable power. Not only did the gold help the government, it also helped investors, as they often find gold as a safe place to put their money. Another advantage is that the gold is known to hold a fairly consistent value, even over a long period of time..
My article is mostly about the government taking advantage of their resources to pay for their debts. This connects with two topics in the textbook. First of all, although the textbook talks about using resources to produce goods and services instead of paying debts, the similarity is that the government recognized this opportunity to take advantage of the resources. The natural resource, gold, is both abundant yet limited, and the government had to make a decision on how to use this resource. This ties into economics because a part of economics is about making decisions on using scarce resources. Secondly, because the government chose to invest their money in paying bank debts, opportunity costs appear. Some opportunity costs would be that the government is now unable to do other things with that gold or money.
My personal opinion on this article is quite positive. In my opinion, I found that the government acted quickly in investing their money towards the gold when the value boomed. This not only helped pay some of the banks’ debts, it also helped the country’s economy. Another part of me also felt that the banks shouldn’t have had to face such a great debt in the first place, and that if they didn’t have a debt upon them, the government could have used that gold for another important use. Ultimately, the country was quite lucky that such a prosperous event happened to them.
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3 comments:
Isn't this the bailout of all bailouts in the States?!
I agree with you with two hands up that opportunity cost is one of the core issues of the crisis. Think of what could be done with those 70 billion dollars? Or was it 700?
Regardless, I havn't read the article but from what you said it does seem overly positive. I don't think the increased value of gold or anything else for that matter could save them now. And by "them" I mean the average Americans who are at heart good people and are now facing evictions from their homes and mounting taxes.
Like you said, what if the banks didn't get the economy into all this mess in the very first place?
And to think the very executives that are at fault are now protected by their golden parachuts...
How puzzling!
I agree with the fact that gold is a safer choice than buying American dollars. The sub-prime loan after effect in the States have significantly cause the US dollars to decrease in value.
Hence, gold is a good substitute for US dollars for investing.
Yet, I also agree with Angela's point that the increase value in gold cannot really save them at this point. In truth, the problem existed 2 years ago already but the market has kept it quiet in order to prevent what we see today.
Besides, the debt has now reached 19 trillion, a number that cannot really be payed off using a limited resource. Regardless, I admire your optimism to the situation and the fact that there is hope for the people of America.
John Hui
I found it very interesting that throughout your article I read phrases such as "gold is a safe place to put money" and "gold is known to hold a fairly consistent value". It made me think of how Mr. Bach talked to us in class about diamonds. If nobody believed that gold was a stable and always-present resource, would gold be devalued?
Anyways, that's a bit off topic, but I wonder if gold is really as 'safe' an investment as the American government thinks it is. I don't follow the news so much, but didn't this whole banking problem originate in investors (your average citizen) buying stocks or bundles from the bank (headed by corrupt executives), which they thought would be safe?
Like John, I admire your optimism, and hope it will be rewarded; and my fears unfounded.
- Krista Wong
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