The dairy market is experiencing a surge in production. But why? Do Americans drink more milk than at other times? Not necessarily. However, Greek Yogurt has become quite fashionable. It is perceived to be healthier than other types of yogurt and at the same time seems luxurious.
Two of biggest producers in the Greek Yogurt market have facilities located in the state of New York. Because of such high demand there are plans for building even more plants to keep up. The growing Greek Yogurt market has lead to an increase in demand for its key input: milk. Greek Yogurt requires more milk to produce than regular yogurt. It takes 3 lbs. of milk to produce l lbs. of Greek Yogurt Greek Yogurt Boom. Luckily for New York Dairy Farmers this provides a reliable buyer for their milk. New York Diary Farmers would have to increase milk production by %15 in the next two years to keep up with demand Greek Yogurt Boom. Milk producers have begun increasing their herd sizes. Because of the proximity of the growing milk market transportation prices have fallen dramatically.
Perceptions have a lot of power for change “It’s nutritious. It’s safe, it’s healthy and it’s delicious. How can you be any better?” - John Sanford, a dairy regulator with the Tennessee Department of Agriculture Greek Yogurt Boom
Sunday, March 23, 2014
Saturday, March 22, 2014
Cost of Healthcare
A big determiner for whether or not to invest in a market is whether or not a market's price is greater or less than the average cost of production. One struggling industry we could easily apply this concept to is healthcare in America. It is no secret to the average American that our nations healthcare is under going major changes, reconfiguration, and exits.
Healthcare costs are also increasing for the consumer: "Between 2005 and 2013, average premiums for individual plans increased 37%." Rising Premiums But of course preceding consumer costs is the rise in costs for providers. The cost of malpractice systems, expensive drugs and devices, and tighter regulations (among many other variables) lead to increasing costs to maintain a feasible hospital. Some added regulations have come with the Affordable Healthcare Act that makes it mandatory to provide certain “essential health benefits” Rising Premiums. In 2011 a study found that "The average American worker costs their employer $12,000 annually for health care benefits and this figure is increasing more than 10 percent every year." 1/3 Hospital Closing
One study of the Massachusetts Hospital Association from 2008 showed that between 2004 and 2008 hospitals experienced a 50.2% wage increase for RNs alone. Massachusetts hospitals also saw an annual increase of 8.7% in Patient Care Supplies and Other Expenses. Hospitals also do a lot of their business with the government. With insufficient Medicaid and Medicare reimbursement hospitals sustain heavy losses. In the FY 2008 alone Massachusetts hospitals experienced Medicare payment deficits of $317 million MHA Costs.
With healthcare costs only rising some think the new Accountable Care Organizations could provide an answer. Does the problem of rising costs really come from the payment-for-treatment system? Will hospitals be able to operate on a "payment-for-healthy-patient" system? Many hospitals are finding the average costs of operation too high and are closing their doors. The fourth hospital in two years in the state of Georgia has recently closed Hospital Closing. Another harsh side-effect is that these closings are more common in poorer areas. Some are even predicting by 2020, 1/3 of all hospitals will close their doors or be completely reorganized 1/3 Hospital Closing.
Healthcare costs are also increasing for the consumer: "Between 2005 and 2013, average premiums for individual plans increased 37%." Rising Premiums But of course preceding consumer costs is the rise in costs for providers. The cost of malpractice systems, expensive drugs and devices, and tighter regulations (among many other variables) lead to increasing costs to maintain a feasible hospital. Some added regulations have come with the Affordable Healthcare Act that makes it mandatory to provide certain “essential health benefits” Rising Premiums. In 2011 a study found that "The average American worker costs their employer $12,000 annually for health care benefits and this figure is increasing more than 10 percent every year." 1/3 Hospital Closing
One study of the Massachusetts Hospital Association from 2008 showed that between 2004 and 2008 hospitals experienced a 50.2% wage increase for RNs alone. Massachusetts hospitals also saw an annual increase of 8.7% in Patient Care Supplies and Other Expenses. Hospitals also do a lot of their business with the government. With insufficient Medicaid and Medicare reimbursement hospitals sustain heavy losses. In the FY 2008 alone Massachusetts hospitals experienced Medicare payment deficits of $317 million MHA Costs.
With healthcare costs only rising some think the new Accountable Care Organizations could provide an answer. Does the problem of rising costs really come from the payment-for-treatment system? Will hospitals be able to operate on a "payment-for-healthy-patient" system? Many hospitals are finding the average costs of operation too high and are closing their doors. The fourth hospital in two years in the state of Georgia has recently closed Hospital Closing. Another harsh side-effect is that these closings are more common in poorer areas. Some are even predicting by 2020, 1/3 of all hospitals will close their doors or be completely reorganized 1/3 Hospital Closing.
Tuesday, March 4, 2014
One big idea in economics and a key to understanding a countries economic health is inflation. First what is inflation? and Why does it happen?
Inflation simply put is when there is "a sustained increase in the supply of money" which leads to the increase in the prices of goods and services. For the longest time I thought there was a little magic involved or someone at the capital must sit at a desk and guess at the worth of the dollar that is currently circulating. Now that I understand the concepts of supply and demand it would be logical that currency should follow the same rules.
The Federal Reserve, through the request of banks, is in charge of meeting the demand for money. Banks request the money they need to meet their customers demand and the Federal Reserve issues the currency while backing the notes with collateral in the form of Government Securities or Gold Certificates. Banks also return money in the form of a cash deposits with the Federal Reserve. The Fed in turn removes the bills that are unfit for circulation and destroys them. Then a request is put in to the Bureau of Engraving and Printing to replace the old money with new. The Fed When the Federal Reserve is seeking to meet the demand for currency they do not simply "print more money". "The important concept here is that every time the Fed creates money, that money does not increase the total money supply in the economy, it increases the size of the Fed's balance sheet." Inflation The more appropriate name might be an "asset swap" on the Feds balance sheet.
So how does inflation happen. What I didn't understand before was that inflation is a process. If the supply of currency increases that increases the demand for all goods and services because the average person has more money to buy them. Before production can match demand stores would have to set prices higher to avoid shortages. Even if this didn't occur producers respond to the spike in demand by increasing production. But increasing production happens at a price causing an increase in consumer prices. Each time prices across the board rise that means the dollar can buy less. Now you need more of them to buy what you did before with less.
On the flip moderate inflation can be a good sign. A rise in prices signals healthy demand. Money in circulation makes for a moving economy. Inflation can be good?
Inflation simply put is when there is "a sustained increase in the supply of money" which leads to the increase in the prices of goods and services. For the longest time I thought there was a little magic involved or someone at the capital must sit at a desk and guess at the worth of the dollar that is currently circulating. Now that I understand the concepts of supply and demand it would be logical that currency should follow the same rules.
The Federal Reserve, through the request of banks, is in charge of meeting the demand for money. Banks request the money they need to meet their customers demand and the Federal Reserve issues the currency while backing the notes with collateral in the form of Government Securities or Gold Certificates. Banks also return money in the form of a cash deposits with the Federal Reserve. The Fed in turn removes the bills that are unfit for circulation and destroys them. Then a request is put in to the Bureau of Engraving and Printing to replace the old money with new. The Fed When the Federal Reserve is seeking to meet the demand for currency they do not simply "print more money". "The important concept here is that every time the Fed creates money, that money does not increase the total money supply in the economy, it increases the size of the Fed's balance sheet." Inflation The more appropriate name might be an "asset swap" on the Feds balance sheet.
So how does inflation happen. What I didn't understand before was that inflation is a process. If the supply of currency increases that increases the demand for all goods and services because the average person has more money to buy them. Before production can match demand stores would have to set prices higher to avoid shortages. Even if this didn't occur producers respond to the spike in demand by increasing production. But increasing production happens at a price causing an increase in consumer prices. Each time prices across the board rise that means the dollar can buy less. Now you need more of them to buy what you did before with less.
On the flip moderate inflation can be a good sign. A rise in prices signals healthy demand. Money in circulation makes for a moving economy. Inflation can be good?
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