DQ2 Week 2 Please respond to this discussion question by Saturday Day 5 Access http www conference board org economics ConsumerConfidence cfm This is an index based on how people feel about the economy All indexes are created in a similar fashion A base is first selected In this case the base was 1985 and set at 100 Thus if the index was at 57 2 in May 2008 and in October 1992 the index was at 54 6 are people feeling better or worse in 2008 than they did in 1992 If the index was at 62 8 in April 2008 what does that mean for May 2008 In order to facilitate the accurate pessimistic or optimistic value of the economy one must first find values in two forms 1 The trends of the index over time 2 The cost value adjustments in 2008 values The first will give a trend line as the where the economy is going The later is inflation adjustments and what that represents to cohorts in the workplace The last exercise we did in the reading illustrates that precisely as wages are increasing in all sectors with College 4 or more years increasing at a faster rate than the other cohorts When taking in adjusting for 2000 inflation where 2000 CPI is compared to some time or 1980 through 1998 CPI the results are stunning People with College 4 or more years see an increase in net wages as compared to inflation while both of the other income cohorts saw a decrease in net wages as compared to inflation To answer the question of the index forecast for are people feeling better or worse in 2008 than they did in 1992 The answer is people felt better in 2008 because 100 being the baseline and in 1992 the index sat at 54 6 where in 2008 it sat at 57 2 indicates consumer confidence optimism as 75 2 is higher than 54 6 Interesting of course 2008 was when the end of the financial crisis hiccup occurred As Treasury knows no one on the street knows what goes on Compared to one month before shows a better snapshot of what is really going on and that is pessimism on the economy as April being 62 8 and May being 57 2 that is a precipitous drop and thus the consumer does know what is going on Interesting enough is valuing real estate today In 2005 and 2006 we saw values peak almost doubling 2000 values Today we see in some markets a complete retreat to 2000 values This index measure is real and palpable to people and together with leading indicators such as new car sales and compared to the price of oil as compared to 150 per barrel as well as raw metals prices trends and one can get a real pulse of the economy In 2007 metal prices peaked and oil peaked at 150 per barrel The trends in real estate foreclosure started and the real estate values started to drop We had a financial crisis equal to the great depression and the long depression In the future oil will play a lesser role in our economy as e cars and e transportation take hold