Etown SIFE Launches Environmental Blog

Elizabethtown College Students in Free Enterprise has launched its new Go Green! blog at http://sifegogreen.blogspot.com. Read about ways to make your home, your life, and your business more environmentally friends, while saving money at the same time. Be sure to check it out.

Crooked Accountants and Know-Nothing CEOs

Extended form of latest SIFE Sense article as seen in the Etownian

As a naïve child, I had many peculiar opinions of what colloquialisms and phrases used in our culture actually meant. I can recall hearing about a businessman getting arrested for money laundering and summarily meticulously double-checking my pants pockets to ensure no errant bills were inside before putting them in the laundry basket. I can recall viewing successful businessmen such as Donald Trump and Bill Gates as the closest thing to deities on Earth. However, as I matured and the “real world” intruded upon my existence, I realized that businesspeople could be just as vulnerable to the temptation of greed as the common criminal.

Throughout the twentieth century, the notion of letting the free market act as it desired (known as the principle of laissez-faire) prevailed. Corporate officers were essentially free to conduct their business to their wishing. Unfortunately, behind the scenes corporate executives, accounting firms, and other avarice-stung money managers were often altering accounts, exchanging insider information, and laundering money at the expense of shareholders and employees. Yes, money laundering actually refers to the practice of diverting funds from public accounts to undisclosed sources. Due to unethical conduct, several big-name CEOs and CFOs have been charged with these crimes since the dawn of the new millennium.

One of the most noteworthy and standard-setting cases was that of Enron and its accounting firm, Arthur Andersen. CEO Jeff Skilling and CFO Andrew Fastow were implicated in the misquoting of company earnings in financial reports in conspiracy with Andersen’s accountants, and late company founder Ken Lay was also charged with fraud and conspiracy. While testifying, Lay denied having any knowledge of his subordinates’ actions, but this was refuted by the prosecution who claimed that a CEO must be totally in control. While some money-hungry chief execs would undoubtedly step up to debate this, I would argue that CEOs were not paid an all-time record of 419 times the salary of the average worker in 1999 to claim ignorance of lower-level executives’ (mis)management of corporate accounts.

The particularly inane thing about corporate corruption is that the executives imagined they could get away with manipulating company accounts for their own benefit, in a workplace where someone is always looking over your back and auditing your reports. Now, Tyco Electronics’ Dennis Kozlowski, WorldCom’s Bernie Ebbers, and Skilling all share a common residence – prison. In hindsight, I would speculate that none of them would argue that their misdeeds were profitable. In addition, corruption and corporate irresponsibility all demonstrate an inverse correlation with a company’s bottom-line profit margin. These recent cases have reiterated an age-old adage regarding crime – it doesn’t pay.

SOURCES AND ADDITIONAL RESOURCES:

http://www.msnbc.msn.com/id/12968481/ (Article: Lay, Skilling Guilty in Enron Trial, Thursday, May 25, 2006)

The Decline of the "Almighty Dollar"

Extended copy of current SIFE Sense article as seen in the Etownian

Perusing the financial news has become a depressing activity for many lately, as the Dow Jones Industrial Average has plummeted over the past couple months, mirroring the woes of the economy as a whole. These difficulties have been compounded by the subprime mortgage lending crisis, which has contributed to a dramatic decrease in the stock prices of banks and other financial institutions, as well as the skyrocketing price of oil. The continuing slump has not passed without affecting the exchange rate of the U.S. dollar, as the demand for U.S. goods and services has diminished as our economy has dwindled.

As of August 5, both the British pound and the Euro held significant advantages over our dollar, with the Euro’s value at $1.56 and the exchange rate for the pound at $1.95. There are several factors influencing this slackening, including a decline in consumer confidence and spending within the U.S., a decrease in trust in the U.S. currency within foreign markets, increased trade between major world economic players and the European Union nations, and diminished foreign investment in U.S. interests stemming from unease regarding a possible recession. This has raised some suspicion from financial analysts that ultimately the Euro may become preferred over our dollar amongst global central banks, exacerbating its decline and creating further economic woes for the U.S.

The U.S. trade deficit is a widely recognized malady, indicating that the volume of our imports has since the 1970s (and more markedly since 1997) exceeded that of exports of domestic goods. This lack of foreign purchasing has also contributed to our government’s budget deficit, spurring them to finance some of our debt with bonds in foreign economies. These and other difficulties have piqued the concerns of foreign investors and governments, contributing to the diminished confidence in our currency.

Despite these woes, there are indications that the dollar may not be in as great of jeopardy as commonly assumed. The yield rates on treasury bonds are typically inversely correlated with the value of the dollar, meaning that as the dollar value declines, the yield rate should increase. However, throughout the past six years this has not been the case, as the yield rate has actually decreased contrary to what is to be expected with a decline in the dollar’s value. Unfortunately for our currency, this phenomenon is considered a secondary indicator when compared to the exchange rate.

With the present mortgage crisis and economic pressure stemming from the value of oil, the dollar value may seem like a secondary concern. However, it is critical to remember that its worth is reflective of the clout of our economy on the global scale and affects our ability to import from other economies. The declining value relative to the Euro may be indicative of the increasing economic power of the European Union member nations and the comparative waning of American industry.

SOURCES AND ADDITIONAL RESOURCES:

www.x-rates.com (exchange rate tabulator)

http://www.msnbc.msn.com/id/21018869/ (Article: Should we be worried about the falling dollar?; Sunday, Sept. 30, 2007)

http://useconomy.about.com/od/tradepolicy/p/Dollar_Value.htm (Article: Value of the U.S. Dollar)