The Housing Bubble

     The policy I decided to review was the Federal Reserve's actions to pull the economy out of a recession in 2001.  In order to stimulate the economy, the Federal Reserve decided to keep interest rates low to stimulate economic growth.  The unintended consequence of keeping the interest rates too low for so long was that Fed created an asset bubble in the housing market that popped and lead to the worst recession since the Great Depression.
     The mental model the Federal Reserve had was to review economic growth and take steps to avoid a depression and the public pressure that came with it.  The policy the Fed enacted was to control the Federal Funds Rate and increase or decrease the supply of money in the economy and balance out economic growth.  What the Fed failed to account for was that by keeping the interest rate low for so long was that after an initial delay, the availability of cheap money lead to the rise in unscrupulous lending.  This drove up the competition for assets and asset prices such as houses and reinforced economic growth.

  

The Current State of the Chesapeake Bay

     I grew up along the banks of the Rappahannock River, one of the many tributaries of the Chesapeake Bay here in Virginia.  I was aware very early on that the livelihoods and lifestyles of the people in this rural area were closely tied to the health of the river and bay and the harvest of blue crabs and oysters they yielded.  The problems in the Chesapeake Bay and its tributaries run the gamut from waterfront development, increases in run-off sediment, disease in the oyster population, the decline of the blue crab population, and "dead spots" where the oxygen level of the water is too low to support marine life.  Steps to correct the situation resulted in the passage of the Chesapeake Bay Preservation Act (Bay Act) by Virginia in 1988.  So far, the results have not been good.

     I would track the oyster population over time as the key way to illustrate the decline of the Bay's health; history has shown that these two factors have continued to coincide.  Hard elements within the Bay ecosystem include the amount of marsh that acts as a filter for run off, the oyster population that acts as a filter feeder, and the oxygen stats of various bodies of water throughout the watershed.  The soft elements in the Bay system include the deeply proud "waterman's culture" that promotes continued fishing even when it is not economically viable, the poaching of various marine life, and local farmer's resistance to abide by the terms of the Bay Act.

Testing Testing 123

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