Blakeyovich Enterprises - Iron MBA Economic Analysis
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Transcript of Blakeyovich Enterprises - Iron MBA Economic Analysis
Blakleyovich Enterprises – Fine Chalk Purveyors
Current Economic Conditions and Business Implications
Iron MBA Economic Consulting Department
Christopher Serio, Velvet Voelz, Net Vittawat, Tiffany Lu
Current Financial CrisisWho’s Failed?
Sept. 7: Fannie Mae and Freddie Mac
Sept. 15: Lehman Brothers
Sept. 16: AIG
Sept. 26: WaMu
Who’s Changed?
Sept. 15: Bank of America buys Merrill Lynch
Sept. 17: Barclays purchases North American Banking Division of Lehman
Sept. 21: Goldman Sachs and Morgan Stanley become bank holding companies
Lions and Tigers and Stocks, Oh My!
Wall Street has seen its share of ups and
downs over the past 30-days with an overall
decrease in the past year.
Dow Jones Industrial Average – 1 Year
Fiscal Policy - The Bailout • Despite the government proposal of $700 billion, we are told that the bailout won’t have an effect on the 2009 deficit.
• This will not increase government spending, therefore it will not bolster GDP.
• The bailout will be a band aid, but bank failures are likely to continue.
Self-Reinforcing Loop
Bank Failures
Tightened Lending
Practices – Higher Interest Rates for Credit
Businesses Decrease
Production
Increased Foreclosure
s
Higher Unemployme
nt
Low Consumer Confidence
Monetary Policy
• In an effort to flood the markets with liquidity and avoid a credit freeze, the Fed will take steps to lower interest rates by .25%.
• Fear of another bubble will keep the Fed from reducing rates too low.
Foreign Exchange Implications
Forecast
GDP
Unemployment
T-Bills
7%
-0.5%
Under 1%
Loan Implications:As the T-bill rates remain under 1%, the
Blakeyovich loan will incur a low interest expense
Sales will only decrease slightly:Chalk sales are not overly sensitive to
increases or decreases in income.
The Blakeyovich Effect
Recommendations
• Concentrate sales efforts within school systems
• Consider selling internationally
Question? (only one allowed)
IS/LM Curve