I hope all of you have been reading Bill Dickens wonderful and informative articles on economics called "What is economics?" their is an article in today's A.M.E. Herald. There is so much news regarding the economy in america, it is slow, we may go into a recession, the feds lowered in interest rates, consumer confidence is down, shopping is down etc. Do you know what all of that stuff means;-)

Professor Bill Dickens has generously written an article for the Herald and it is exciting. And most importantly it is understandable.

I have a question for Bill and I hope others will also feel free to ask Bill questions.

Bill, I do not understand what the lowering of interest rates means in terms of "Jump starting the economy?" I don't know what that means either. It seems every month the interest rate goes down. But not for credit cards, why?

For years I heard about reducing the national debt? What is the national debt? And how much is it? And should I care. I have finally learned that the only dumb question is the one not asked.

Gill's article can be found at

www.ameherald.com

Thanks

-- Anonymous, June 30, 2003

Answers

Oops, sorry it should say in the above post "Bill's article" thank God he is my brother and hopefully he will forgive me;-0

-- Anonymous, June 30, 2003

My 2 cents (pun intended):

Example: Farmer grows corn. Food Distributor buys corn from farmer. Farmer takes profits and buys fertlizer, land, and equipment to expand their operations. Those companies can employ people who in turn need to consume products.

The distributor sells corn to various manfacturers who make products (Corn Dogs, Cereal, Tortillas, Paint, Cosmetics, etc.), which consumers (us) buy. Some of those consumers work for fertilizer companies, and equipment companies which sell the farmer products that he needs.

Make sense so far?

When money stops flowing from one sector to another, it has a chain reaction, and the economy slows down. If I, as a consumer, think that my job is in jeopardy (like the dotcommers), I cut back on my spending. Businesses cut back on their ordering. Money stops flowing, and voila we have a recession.

Housing starts (new homes being built) is a barometer for the economy. Homes being built means that cement, lumber, sod, paint and fixtures will be purchased. Taxes will be assessed for the city, county, and state. Furniture will be purchased. Movers will be used. Construction workers will be employed.

When the interest rate goes down, it allows developers to obtain capital for building homes at a lower rate (1/2 of a percent when you are talking about a 10 million dollar project is an extra 50,000, which may be enough to get some people hired to start the project).

A lower interest rate makes it more attractive for you to buy a home (Never mind the fact that you will over the course of a 30-year mortgage pay 2-3 times the original purchase price) or refinance, which will free up some money that you can spend.

To encourage consumers to spend, the Federal Reserve Bank will lower the interest rate, on the assumption that money will start flowing. It's like priming and old water pump. You pur a little water in to get a lot of water out.

Interest Rates on credit cards do not go down because 1) that's how the banks make money on you, so that they can pay their employees, so they in turn can consume another secotr's products.

I know that I have oversimplified Economics 101, but it is a start.

John

-- Anonymous, June 30, 2003

Question # 1 - How much do you know about economics?

Answer # 1 - A "fair" amount :-)

Question # 2 - Why did Richard Allen make economic development a key part of the AMEC?

Answer # 2 - Probably because he was one of the few (like Booker T. Washington) to understand that faith, freedom and private property were all ingredients to help the Negro reach his God-given potential.

Question # 3 - What is the relationship between interest rates and "jump-starting the economy"?

Answer # 3 - Interest rates represent a special price which economists refer to as the cost of capital. If interest rates fall this lowers the cost of capital and encourages corporations to purchase more machines, tools and physical infrastructure (investment) in order to achieve higher profits. As the rates fall more people begin to invest in stocks and bonds because the "yield" on these instruments exceed what you can earn on low-yielding bank savings accounts or certificates of deposits. Greater stock buying behavior and higher investment spending fueled by declining interest rartes will greatly help in jump-starting a slumping economy.

Question # 4 - Why aren't interest rates for credit cards declining?

Answer # 4 - When the Federal Reserve lowers key interest rates, credit card rates, like all other revolving charges, will decline but with a lag in time (3-6 months). More important than the credit card interest rate is the APR.

Question # 5 - What is the National Debt?

Answer # 5 - The National Debt represents the accumulated Federal budget deficits (Revenues - Expenditures = negative value) the US has incurred since the country was legally created in 1776.

Question # 6 - What is the current size of the National Debt?

Answer # 6 - According the the Economic Report of the President (February 2003), the size of the National Debt stands at $7.3 trillion dollars.

Question # 7 - Why didn't I get any "Happy Birthday" wishes from AME Today on June 8?

Answer # 7 - ???????????????????????????????????? QED

-- Anonymous, June 30, 2003

Economic Development is critical to the success of any race or church because he who has money has power.

Here are some chilling reasons we need economic power:

We are 12% of the population with less than 1% of the wealth, but we are the largets consumers of hair care products, clothing, liquor, and Cadillacs.

A dollar tunrs over once in our community before leaving. In other races, that number goes as high as 11 and as low as 4.

Example: You get your paycheck (in Los Angeles), and instead of shopping on Crenshaw (black-owned businesses), you shop on Rodeo Drive (In Beverly Hills). By doing this, the black businesses on Crenshaw have less money to pay their employees, who in turn cannot buy the things they need or want from other black-owned businesses. If the money had been spent on Crenshaw, those businesses could order more supplies, and start an economic boom within the black community.

Another example: An old joke in this country is that you never see a garbage can in the back of a Chinese restaurant. It is a stereotype, but it has economic truth.

We buy a chicken from the store and do what? We fry it up. We eat the wings, and breasts, and thighs, and drumsticks. We may eat the neck and gizzards. Then we are done. Money was spent.

The Chinese buy live chickens. They pluck the feathers to stuff toys and pillows. The head and back are used to make soup stock. The gizzards and neck are sold to us . The feet are used in dim sum. The other parts end up on the menu, which is sold to us. The result: Nothing wasted, and money is made.

On a larger scale,

The A.M.E. church is the largest black denomination, but we don't own a major hotel chain. (The Mormons do)
The A.M.E. church is the largest black denomination, but our colleges are failing (Duke and Creighton, SMU and Pepperdine aren't).
The A.M.E. church is the largest black denomination, but we don't own a bank (Bank of America used to named the Bank of Italy...you do the math.

John

-- Anonymous, June 30, 2003

Happy Birthday to yooooooooou.
Happy Birthday to yooooooooou.

Happy Birthday Brother Billllllll-lllllbr>

Happy Birthday to yooooooooou.

You share a birthday with Bishop Bryant, so that might have been why...

-- Anonymous, June 30, 2003

Preach! Preach! Preach! Rev. Harper,

You have made my day to hear an AME minister preach like you have about economics. There is indeed hope for our church. I should have suspected that being a member of First AME church in Los Angeles, California that you would be a progressive individual. I am going to pray that we get more leaders like yourself.

Also, thank you very much Profesor Dickens for your articles on economics. However, I do not understand why a nation with a debt of 7.3 trillion dollars does not cut its spending(reduce size of government).

Jazzman

-- Anonymous, June 30, 2003

Great discussion everyone and I hope we will keep this topic going and thank you for answering my questions, there is still so much for me to learn.

Bill Rev. Harper was right, June 8th is my Bishop's birthday and my Presiding Elder's birthday on June 8th. And our church always send them something for their birthday, so I was preoccupied. But you dear Brother Bill are in a class all your own. Please send me your address, so Danielle and I can send you something and I need to send something to Jenny also.

Montana is known as the treasure state, so please forgive me and Danielle, in our family we celebrate our birthday for the whole year and you are in our family. God bless you brother bill and you don't look a day over 25.

-- Anonymous, June 30, 2003

Thanx so much Professor Dickens and Happy Belated Birthday!

The state of the US economy has always been a mystery--thanx Prof. Dickens for clearing away some of the smoke and mirrors.

However,

nothing is more ominous and mind-boggling as AME economics. For example, my church boasts membership of 125 (circa 1979)/86(reported for Conference 2002-2003). Honestly, we have about 40-45 active adults. Our budget is close to $11k per annum not including the +++.

so my question is, how are our budget allotments determined? what is the mathematical formula? Does the church have any metrics?

I am anxiously awaiting the answers to my questions, this discussion board is the knowledgebase of the AME church it seems.

I am humbled.

PHIL4:19

kc

-- Anonymous, July 01, 2003

Hi Parson Carter !!!

You raise a vitally important point about the "mystery of AME economics". I am not aware of any official metric or formula which is used to establish the local church's financial obligation for supporting her Episcopal District. When I checked the 2000 Discipline I could not find any documentation which served as a guide to help a local church in this important endeavor. If it is indeed true that no such official metric exists this needs to be corected. I would propose that any such formula be based on how our US income tax system (progressivity) is structured with the emphasis on efficiency and equity. My proposed metric (recommendation) would look something like the following regression formula -

Conference Claims (CC)= f{+full membership, +%probationary members,+per capita household income, +per capita household net worth, -unemployment rate, -poverty rate, +avg. years of schooling & +%registered voters}

The equation is interpreted as follows. A local church's conference claims should be determined by local and surrounding activities which influence ability to pay. It should be a function of the size of membership, several key economic variables, income, wealth and unemployment and several socio-political parameters - education and registered voters. The sign in front of each variable means that an increase in a particular variable(+) would be associated with increased CC. If the sign is negative (-) this suggests that an increase in this variable would lead to lower CC. The key, like the tax system, is encouraging local church compliance. AME churches also need to update their system of record management so that we can have more accurate censuses of our membership. Non-compliance is high for our local churches because we lack a credible enforcement mechanism to extract CC. To my knowledge we don't utilize audits to ascertain whether these CC are accuarate. We have many so- called "1st churches" who are not contributing based on the above economic principle of ability to pay and too many smaller churches paying above and beyond what should be required. My proposal is aimed at correcting this fundamental inequity. Good question. I hope this helps. QED

-- Anonymous, July 02, 2003

Bill is your proposal also going to introduced as possible legislation? It might be something to think about?

-- Anonymous, July 02, 2003

actually, as Bill knows, he also shares a birthday with Pastor Payne. Since I was somewhat preoccupied feting her, I apologize for not logging on to greet him as well.

Many happy, belated, returns.

-- Anonymous, July 02, 2003

Excellent recommendations and insight! The proposed metric is well- conceived and I agree w/Rev. Rogers that it needs to be brought to the attention of the Connectional Church. Bishop Cummings led a campaign for "Tithing" the budget per church to change from the current system. It was "theologically" sound and he had a great Power Point Presentation however, the logic and implementation left allot to be desired.

With your permission Prof. Dickens, I am going to run a test case on your formula with my church and the applicable demographics. With a ;ittle persuasion, I can probably talk my fiance into using his church for a test case also.

As usual, Prof. Dickens--well done and well said.

B Blessed PHIL419 kc

-- Anonymous, July 03, 2003