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