PAGE 10//WEDNESDAY, SEPTEMBER 16, 2009
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Steve OeLoach
Elon Economics
Professor
The current
situation in the
United States
economy, at the
forefront of the
news since last
fall, has not
necessarily been
explained at a
level that the
general public
can understand.
Elon Economics
professor Steve
DeLoach provides students with an
easy-to-undcrstand background of
the current economy and how it got
to this point.
“The mess we have on our hands
today has been years in the making,”
DeLoach said. “I think the roots of this
go back 10 or 20 years. For most of
the ‘90s interest rates were super low
and housing prices were on the rise.
Americans started living above their
means and stopped saving. It seemed
logical until about a year and a half
ago when the housing market started
crashing. Everyone got nervous and
started selling, which only drove prices
further down. Last fall, we had the
big crash everyone refers to now, and
people lost about 40 percent of their
total wealth. It was paper wealth, but
if you cut what you are worth in half
you are going to stop spending. You
aren’t nearly as wealthy as you used to
be. Suddenly, that Lexus doesn’t look
like .such a good buy. It can all really be
boiled down to the fact that consumers
stopped spending because they didn’t
feel rich anymore.”
Despite this bleak analysis, there is
some good news. According to DeLoach,
there are signs that we are starting to
come out of the recession — consumers
are .slowly beginning to spend more
money and businesses are starting to
produce more. Unfortunately, he said
the last thing to respond during a
recession is actual employment.
“Businesses have a tendency to
start working their existing workers
longer hours long before they actually
hire new people,” DeLoach said. “It is
a large cost to hire a new worker, so
they are only going to hire new people
if they are really sure about where
the economy is, which is going to take
some more time. About 16 percent of
Americans are currently unemployed
or working part time when they really
want to be working full time, and
those numbers are only going to get
higher into sometime early next year
at least. But the good news for seniors
is things should start looking better by
next summer.”
DeLoach has already seen the
economy affecting college students.
When he asked his freshmen classes
what they did over the summer, many
of them responded “nothing,” as they
were unable to find a job. Internships
were at an all-time low this summer
and many jobs typically held by
college students were unavailable as
unemployed adults were forced to take
on menial labor.
I
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Laura Wainman
Special Projects Editor
ASHLEY BARNAS | Photographer
Senior Lesley Cowie works weekends at Family Video in Burlington as
one of her three part-time jobs.
It seems that it is near impossible to go a day
without reading a headline about the economic
downturn or hearing about dwindling stock
portfolios. Though Elon was named one of
Princeton Review’s “100 Best V'alue Colleges for
2009," it is still a private university with tuition at
$25,489 and room and board at $8,236. Therefore,
it is no surprise that one of the biggest effects the
economic crunch has had on Elon students has
been their ability to afford Elon.
Pat Murphy, director of financial planning,
said there has been a large increase in the number
of students applying for financial aid this year.
While the final numbers are still being calculated,
Murphy estimates at least a 15 percent increase,
which he believes is because of the increase in
parents who have lost their jobs.
“Unemployment among Elon parents has not
been restricted to any particular profession,”
Murphy said. “I have seen people who were making
as much as $500,000 a year lose their jobs. When
you have a lifestyle that has been supported by
half a million dollars a year and suddenly that
money is gone, you have a lot of commitments that
you need to satisfy, so it becomes a problem.”
Murphy also noted that many of the scholarship
accounts from which funds are drawn have had
lower balances this year since they have earned
less money because of the market.
“For example, an endowment that might have
produced S3,000 worth of scholarship money
last year might have produced $2,500 this year,”
Murphy said.
Parents are not the only ones whose jobs have
been affected by the economy. Many Elon students
have also expressed concern regarding jobs.
Sophomore Laura Bondi said her hours at both
her on-campus job as well as her summer job were
cut.
“Budgets everywhere have been decreased
because of the strained economy, and on top of
that minimum wage was increased,”
Bondi said. “Employers have to
make cutbacks somewhere and in
my case, hours had to be cut.”
Bondi said while she made
changes in her personal life while she was at
home, she hasn’t needed to at Elon.
“College students are kind of in a bubble where
they don't have to spend as much money,” Bondi
said. “I don’t need a car on campus, so gas money
isn’t an issue and 1 have a meal plan so I don’t
need to spend extra money on food.”
For senior Lesley Cowie, budgeting has been a
major part of her life since 2001 when her father
lost his job in the textile industry. Her family now
lives off her mother’s $9 an hour salary as a Lowes
cashier, which leaves Cowie on her own when it
comes to rent, food and other college expenses.
Cowie maintains three part-time jobs while
juggling a full course load in order to make ends
meet.
“My dad’s situation affected me more than the
economic crisis,” Cow'ie said. “I was already pretty
thrifty so I didn’t really need to cut back per say
because I was already working so much that 1
knew exactly where I could afford to spend.”
Murphy, DeLoach and Cowie all advised
that students maintain a budget and take full
advantage of the free entertainment offered on
campus.
The good news for Elon students is that the
Student Union Board, an organization dedicated
to providing students with low-budget or free
programming, has not been affected monetarily
by the economy. SUB has actually increased the
number of programs offered to 70-80 a semester
in order to account for the current economic
climate.
While the economic problems have slightly
infiltrated the Elon bubble, students have found
their college lives to be relatively unaltered.
Tracking the financial crisis
L.S, Sep,en,ber. a financial cnsis Wa, began .im turmo, In me subprln^ n^rtgage marvels nearly trcughl me world's economy ,o l,s knees.
Behind the crisis 2008: Near collapse, government Interventions
September
• U.S. Qovernn>ent seizes
federal mortgage
insurers Fanrwe Mae,
Freddie Mac
Dow higrv-
14,164.53
• Lasl two investment
banks standing, Morgan
Stanley and Goldman
Sachs, convert to bank
holdir>g companies
to gain access to more
loans from the Fed
6,000
In 2006, the boom in U.S.
housing phces abruptly
ends, causina a mettdown
in the U.S. subprime
mortgage market, whtch
lent money to borrowers
with poor credit, r>o cash
In April 2007. New
Century Finarrcial. the
second largest U.S.
subprime lender, tiles
for bankruptcy
In Octot>er. the Bush
admnistratk>n unveils a
ptan to stem subprinr^e
foreclosures, txit it does
rx>t stabilize the subpnme
n^arket; Federal Reserve
t)egins cutting rates
By year's end. many
o^for financial instltutk>ns
workJwide have cited
k>sses due to the drop
m value of U.S
mortgage-backed debt
9A)7
January Data for 2007
: shov^ the largest drop
I in home sales in 25
; years, promptina fears
; of more k>an deraults
' March
• U.S. investment bank
^ Bear Stearns feits due
: to its exposure to the
. sut>pnme market and is
. sokJ to JPMorgan Chase
in a Fed-back^ deal; its
: collapse stokes fears
: about the finanaal sector
• Fed lends directly to
securities dealers for the
: first time since the 1930s
to ease credit
July Federal Deposit
insurance Corporation
takes over sub^me
, lender IndyMac
[l/08
12,000
• U.S. tnvestment bank
Lehman Brothers files
for bankruptcy, sparking
a gk)bai panic
• Fed lends giant insurer
AIG $85 billion, the first
of several loans, in return
for an 80 percent stake,
after ratir>g agerxiies
dowr\graded the insurer’s
credit rating
• Bush admmistration
unveils $700 billion plan -
krK)wn as the Trout)led
Asset Relief Program.
or TARP ~ to stabilize
financial markets
• FDIC seizes
Washington Mutual, the
largest U.S. savings and
toan, sells it to
JPMorgan Chase;
Wachovia enters Into
talks with Citigroup, then
IS sold to Wells Fargo
October
• President George W
Bush signs $700 billion
bailout bill
• Fed makes an added
$900 billion of short-term
lendir>g available to
banks, says it will lend
$1.3 trillion to non-
financial firms
• FDIC insurance deposit
limits raised to $250,000
• Belgium. Iceland. U.K.
bail out or nationalize
five firms exposed
to weak U.S. assets -
• Ireland and Denmark
guarantee bank deposits
•BNP
Paribas takes
over Fortis,
making it the
largest
Eurozone
1 bank
2009: Fiscal stimutus, hints of recovery
January Barack Obama
succeeds Bush as U.S.
president, appoints
economic team,
including former N.Y. Fed
chair Timothy Gerthner
as Treasury secretary
February
• Obama signs $787
billion stimulus package
into law; nations world
wide pump stimulus
money Into their
economies
• Geithner unveils
ptan to deal with
crisis, including
“stress tests” to judge
the financial health
of big banks, the
creation of the Term
Asset-Backed
Securities Lending
Facility. orTALF,
to ease credit for
consumers and small
businesses, and a
plan to encourage
private investment in
troubled assets, which
IS slow to takeoff
Soum U S Rwrve, U S- 1>«asury. U.S Federal 0«posA In9urarw« Corporation. Council on Foreign ReiMiorvi, BBC
:> 3/9/09
6,547.05
April G-20 leaders meet
in London, pledge to
triple funding for the
International Monetary
Fund, crack down on tax
havens and improve
Internationa! financial
regulation
June Obama
administration releases
proposal to reform U.S.
financial regulation
September
• A year after the near
collapse of the global
financial system, credit
remains tight,
unemployment high
Dow Jones Industrial Average
• Major central banks
coordinate rate cuts
* G-7 (Canada, France
Germany. Italy. Japan.
U.K., U.S.) finance
ministers meet, but fail
to develop crisis plan
«.ooo
Gr»pKc- Pat Carr
• But there are
encouraging signs: fewer
jobs are beir>g lost, home
sales are ticking up and
sto^ markets around
the globe are rebounding
16/09
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