HIS 113 American Experience: Wealth and American Culture. Biltmore Estate and Merchant's House

How visiting Biltmore Estate and Merchant’s House enhanced the awareness of the course’s subject matter

            The course the American Experience: Wealth and American Culture provided a very deep and detailed insight into the lives of some of the wealthiest Americans of the 19^th and 20^th century, especially during the Gilded Age and dot.com era. In order to have a better understanding of some of the events, it is very effective to visit some of the historic sites, which belonged to those important periods of the US history. I personally visited two sites Biltmore Estate and Merchant’s House, which correspond to the Gilded Age period. The two houses exhibit different levels of wealth owned by their owners because of the class difference. Most importantly visiting these places helped me enhance my awareness of the course’s subject matter and appreciate American culture more through seeing with my own eyes what each family was capable of accumulating and how they utilized their wealth during important times of the US history.

            One of the historic sites, which helped me shape my opinion about how rich people lived in the 19^th century, was Biltmore Estate.  The house was built as a vacation home for George Vanderbilt’s prominent family with 175,000 square feet of space. Judging by the outside view that opens up when you approach the property, one can be sure this family amassed large amounts of wealth and was not afraid to utilize it in the most exquisite ways. The House is incredibly beautiful on the inside and outside. The best architects for the house, landscaping and materials were used to build it. This house is a true example of the lavish lifestyles the wealthy people led during the Gilded Age. They purchased only the best for their home and had the latest gadgets for the time, which helped ease the life back then and were considered high-tech. For example, there is an electric elevator that still operates, refrigerator, fire alarms, indoor pool with heated water, washing machine, and other devices. The fast accumulation of wealth during this period let Vanderbilt spend it in elaborate ways. For example, stunning chandelier with 72 light bulbs, triple fireplace, enormous library with 16^th century tapestries, famous paintings, and many other unbelievably beautiful things around the house. He would bring something interesting like art or a piece of furniture every time he came home from abroad. The estate is very important historically not only because of the wealthy owner but because it helped raise the level of life and changed Ashville forever. Vanderbilt wanted the mansion to be self-sustaining and for this reason the village was built around it and railroad tracks, which helped bring materials directly.

            Visiting Biltmore helped me personally visualize and experience bygone lifestyle of almost indescribable prosperity. Even though this house is definitely an example of excessive lifestyle, George Vanderbilt actually helped the region during tough economic times by providing jobs. I definitely recommend this historic site for a visit because it also is a great museum for the enormous amounts of things gathered in one place from the 19^th century.

The second historic site belonged to the wealthy merchant class family of Tredwell. It is the New York's only 19th century home located in the NoHo neighborhood, which has the original decorations, furniture items from the best New York cabinetmakers and personal things left by the Tredwells. This house helped me understand and experience the domestic life of a wealthy merchant, who made his fortune through selling hardware, and his family. It also shows how the Irish servants lived and worked during those times. According to the known facts, despite the fact the last owner had financial hardship and the area was changing to more commercial one, she managed to save it in its original form, which helped later on for it to become a museum. It is restored to its 1850 s condition and there is still some work being done. Just because this house belonged to a totally different class, it still has some of the beautiful works of art, furniture items, and personal belongings. The house provides an insight into the lives of the merchant’s family and their staff. Each room served its purpose relevant for the time. For example, Eliza's bedroom was not only used for sleeping but it had multiple purposes. When the guests arrived, ladies would come up and undress their coats and got ready to come down. Then the bedroom was used to care for the sick children, giving birth, it was also a bathroom and her office. As for the Seabury's bedroom it was also used as death chambers. The room also had an access to a smaller room used as an office or a smaller guest bedroom. It is really amazing how this 19^th century home is still standing among other buildings. This is a great historic site to experience the lives of the wealthy. It is also very educational on how New York evolved from a colonial seaport and became one of the utmost business emporiums of America. 

To sum it up, the two houses provide us with enough information on how wealthy people lived during the 19^th century. It also helped me better understand the concept of wealth because various groups view it differently. The amount of wealth one possesses plays a crucial role in what this person surrounds himself with, be it things or people. Vanderbilt and Treadwell, coming from different class, accumulated wealth on a different scale but wanted to have the best things they could afford for the time. It has not changed as people who make enough today also tend to surround themselves with better quality and generally more things. Consumerism on different levels at different times.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!

FIN 260 Strategic Planner and Macro Data Interpretation

If you were a strategic planner for a large firm think about how you would interpret the macro data (jobs, inflation, interest rates, GDP) with what you know from your order book and your customers.

           

Each organization’s ultimate goal is to grow and be profitable. In order to achieve that managers have to be ready for various changes that get on the way and adjust the business activities. This process is called strategic planning. It involves defining the organization’s strategy or direction and deciding on allocation of the organization’s resources. The selected strategy also influences what goals have to be achieved in order to pursue this strategy.  The organization’s strategy and goals depends on numerous aspects but one of them is macro environment. It is a set of uncontrollable factors that influence the decision-making process. The organization cannot control these factors but can come up with a quick response plan to change. Macro data is analyzed at the situation analysis step of the strategic planning. This macro data examination is also known as PEST or PESTLE analysis: political, economic, social, technological analysis, legal and environmental.

Economic macro data strongly affects the purchasing power and spending of the people. Some of the economic macro data examples are jobs, inflation, interest rates, and GDP. There are several interpretations of this macro data that could be derived from looking at the order book and paying attention to the customers buying behavior and their reviews. The macro data can also help make forecasts in various areas such as revenues, sales, materials cost, labor costs, and other important areas. Example of the economic macro data would be unemployment rate or jobs. It could indicate the overall economic health of the country and therefore the spending power of the potential customers. If the people are employed, they have set household income. Any discretionary income left is what they spend on various goods and services in addition to the necessity products. If the unemployment rate is high in the area where the company is offering its goods or services, then the projected sales are not going to be as much. If the organization is not in the essential product and services area, then its sales would be decreased by the high unemployment rate.

As far as the interest rates are concerned, they also influence the strategic planning in the organization. Whether the interest rate is high or low requires an adjusted strategic plan. The customer’s spending can also indicate if the interest rates are low or “affordable”. Low interest rates can help increase the expenditure and therefore decrease the unemployment rate. If the spending goes up, I could make sure the organization has enough stock for the suggested period of the potential increase in spending. If the interest rates would be too high, it would be also hard to take out loans for the business to fund the operation. Higher rates mean higher prices, and therefore some customers may not be able to purchase the products any more.

One of the important aspects that could also affect the strategic planning is the inflation. It is the rate at which the prices rise for the goods and services during a certain period of time and the purchasing power falls. Unfortunately, the relationship between the inflation rate and the income growth is not direct. Therefore, while the prices rise, many consumers do not get paid adjusted for the inflation. So it is important to keep track of the inflation rate so that the organization does not operate at a loss. However, some companies like H&M prefer to keep the same prices even though the cotton prices rose enormously.

Another economic factor that can influence large business operation is the GDP (gross domestic product) number. This measure is used to indicate the overall country’s economic health. If the GDP is low, then government would try to implement certain policies to increase the number. For example, keep the interest rates low, so that it would facilitate purchases. This in turn would mean that the savings that the consumers have in banks would not accumulate enough interest credit to cover for the inflation. This would affect the purchasing power of consumers once again.

All things considered, the economic macro data if analyzed on a daily basis could help prevent drastic changes or failure of the business. Organizations have to be proactive when it comes to responding to macro environment changes. All of the aspects are related to consumer purchasing power and therefore wise strategic planning would also take them into consideration.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!

Federal Reserve under Bernanke and Yellen and Great Recession of 2007-2009

Think about the last 5 years in which the Federal Reserve under Bernanke and Yellen have kept rates at historic lows and created massive monetary growth in hopes of creating a robust recovery from the "Great Recession" of 2007-2009

The recovery that actually is taking place is moderate/modest (their words)...why do you think this policy has resulted in that outcome?

The financial crisis of 2007-2009 was one of the most intense periods in the global economy. Not only the USA but also other countries felt the impact of it that resulted in the deep economic downturn. The US economy after the crisis could not find the way to the fully recover. The situation reminded Japan in the 1990s. There was no economic growth and inflation fell below the allowed 2% mark.

Therefore, something serious had to be done in order to stabilize the financial situation in the country. The Federal Reserve Bank had certain plan in order to make that happen. The monetary policy that it decided to implement involved low (near zero) short-term interest rates, which were supposed to promote the recovery from the recession. In order to decrease the long-term rates, Bernanke, the former Federal Reserve Chair, had the courage to challenge the recession and came up with an ultimate solution that seemed to be perfect at the time. He insisted to implement “quantitative easing” and purchasing large quantities of long-term Treasury securities and other long-term securities, which were guaranteed by organizations such as Freddie Mac, which were sponsored by government. The main reason behind lower rates strategy lays in the fact that lower rates are more helpful for both businesses and households because they help support asset values and lower borrowing costs. This strategy continued to be implemented under the new Chair, Janet Yellen.

The main idea behind this policy was that it would help increase the spending, which eventually lowers the unemployment rate by creating necessary jobs. Lower rates create more attractive and competitive loan options for individuals and businesses. There is a direct link between the economy and consumer spending; this is why I could understand why such strategy was proposed to help facilitate economic growth. In addition, if the Federal funds rate is low for a long period of time, it decreases the value of a dollar in the foreign markets. This means that it would be more costly to buy overseas products. This will encourage businesses to buy domestically, which in turn will infuse money into US economy. Spending is t he key to the growth.

If we look at the recovery process right now, it is considered be moderate. If the ultimate goal of the Federal Reserve to achieve maximum employment, stable prices, and moderate long-term interest rates, I do not see how these factors are getting any better, maybe only at a very slow pace.  According to a research by Harvar’s Reinhart and Rogoff the full recovery can only be visible after the decade has passed. That’s why we only see the moderate pace of recovery now. Business owners are also a bit more cautious when it comes to hiring even though the profits are good. Another problem that would hold back the recovery is the aging baby-boomers population. The government will have to come up with extra funds to support that population.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it! 

FIN 260 Commercial and Investment Banking Systems. Should They be United or Separated?

The questions whether the commercial and investment banking systems should be united or separated and the advantages or disadvantages both case scenarios could cause have been analyzed for years. So was it really a good idea to repeal the provisions that separated the two banking systems?

Back in the days when there was no central banking system, the big banks were actually running the corporate America by helping American businesses become trusts. Those trusts were designed in a way that eliminated any competition and thus became monopolies. Therefore, Congress knew that something had to be done to improve the situation. In addition to the Anti-Trust laws that were passed something else had to dramatically change – banking system. It was believed at the time that the bankers were in too much control over the US economy, and too much power was a dangerous thing. The separation of the systems, however, did not occur until 1930s when the country was trying to eliminate future crises after the Great Depression. Nobody could tell 100% what really caused the crisis, but certain reforms that were deemed necessary at the time were enacted.

Certain notions reasoned the “Glass-Steagall” Act. The fact that the universal systems allowed the banks too issue many securities led to the crash of the stock market. The second reason was that banks had unstable securities in possession and it weakened the trust in the banking system in general. Thirdly, those banks sold those securities to the customers, which caused conflict of interest. Lastly, it was proved that the heads of the two largest banks were involved in insider trading, and tax avoidance.  All of the above helped to pass the Act. But in the 1980s when the commercial banking business was on the downside from the traditional way of lending and the investment banking did not see much of profit, the Act was challenged. Certain analysis was conducted, which indicated that the major reason behind the Great Depression was not the fact the banks were united but the operation of the single branch banks, which were weak and could not handle the pressure.

Now after considering everything, my personal opinion about the fact that the commercial and investment banking systems could operate jointly is somewhat skeptical. On the one hand, I could see how many people, who oppose universal banking systems, see that one of the issues that could be involved is an ethical one. The joint system allows these banks to fund themselves at cheaper rates, which is somewhat unfair. Also these banks could use these deposits to invest in risky securities because government gives them guarantee. For example, if the government will most likely bail out the bank from a risky investment failure, then why not take that step anyway? Those “too big to fail” banks are actually enjoying this perk from the government. But where is the proof that if such bank fails, it would have a ripple effect and threat the whole financial system? Whatever the case might be, the government has to come up with certain regulations to lower the risks these banks are taking because such risks threaten the overall financial stability and is a very costly activity. Another thought against these two systems working under one roof is the fact that the overall bank image could be ruined if a certain security drops in value. Back in the days banks hid their interest in the transactions and could sell securities that dropped in value significantly. If something like that happens now, the general trust in banks could again weaken.

On the other hand, we live in the 21^st century, where all businesses have to provide the best services to their customers to keep them satisfied and happy. Therefore, it is important for banks to provide a wide range of services to stay competitive and make profits. This in turn should facilitate economic growth because everyone is able to do business. Plus, if the banks have their interest in certain organizations that they fund, they will try to help them succeed by eliminating or lowering the conflict of interest to the minimum. With the rise of the securities markets, commercial banks would most likely lose a lot of money because companies could simply fund themselves through successful investments and avoid taking traditional funding. So having both systems together can also save commercial side of business.

All things considered, I see both advantages and disadvantages if the banking systems were separate or together. However, I believe at this point we need a universal system that could provide various services to its customers under one roof. This creates a favorable atmosphere for the bank and its customers. In addition, all banks and especially the “too big to fail” ones have to be more regulated in order to avoid risky financial situations. The drastic reorganization of the banking system right now could only harm the existing structure. A lot of companies can lose a lot of money, which in turn could lead to downsizing or bankruptcy, which in turn will raise unemployment rates. So I say leave the system as is, just add more regulations.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!