Economics in the News – March 6-12, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Regulators moved in to seize assets at Silicon Valley Bank Friday, marking the second-largest bank failure in American history. Only the 2008 collapse of Washington Mutual was more significant. The bank – one of the top 20 banks in the United States – mostly served technology workers and venture capital-backed companies, including some of the industry’s most popular brands.
Deposits have fallen since the Federal Reserve started raising its benchmark rate, causing venture capitalists to borrow less money. The bank’s top executives surprised shareholders last week with news that it needed to sell a chunk of holdings at a loss to raise cash. The news created panic, causing venture capitalists to pull their money and urge their portfolio companies to do the same. The news has the banking industry on edge, as Silicon Valley Bank failed to prepare for rates to rise again after an extended period of low-interest rates. [The Wall Street Journal]
o Undergraduate enrollment at colleges across the United States has declined in recent years with enrollment in 2022 down 7.6 percent since 2019. Small-town colleges are feeling the brunt of the impact with the institutions of higher education playing a critical role in the town’s economy. Along with local hospitals, which are frequently associated with a university, are the largest employers in town. In Clarion, Pa., the school formerly known as Clarion University has seen its student enrollment cut by nearly half. With the decline in enrollment, the university has lost 200 employees and merged with 13 other universities in the Pennsylvania State System of Higher Education last year to create a multicampus university called PennWest.
When students were sent home in the early days of the COVID-19 pandemic, the impact of having no students on campus became apparent for leaders. Those at the Federal Reserve Bank of Philadelphia especially felt the effect with a higher density of higher education institutions than most throughout Pennsylvania, New Jersey and Delaware. Experts say that small-town colleges can do little to about the current demographic changes, but universities can offer space for community functions and further support for small businesses. [The New York Times]
o Farmers in Ukraine are risking their lives as this year’s planting season gets underway. Those who choose to work their land are tasked with scathing fields that are littered with mines and bomb shells left behind by Russian troops. Those who choose not to plant risk an economic crisis with the war costing Ukraine’s southern region of Kherson three consecutive harvests.
For generations, Ukraine has delivered food around the world, producing watermelons, barley, sunflower oil and more. Ukraine’s military pushed Russian forces out of the region last fall, but the recovery has since been slow. Many Ukrainian farmers believe that Russia targeted their fields and equipment to starve Ukrainians and deplete one of the country’s most important economic drivers. The area remains littered with mines and ordnance than an estimated 750,000 acres need to be demined before it is suitable for agriculture. [The New York Times]
o Alabama has been tabbed as the top overall seed for the 2023 NCAA Men’s Basketball Championship which begins this week across the country. The start of the NCAA Tournament comes just days after online sports wagering became legal in sports-crazed Massachusetts. State lawmakers project that the legalization of sports betting could generate $60 million in annual tax revenue and $70 million to $80 million in licensing fees which must be renewed every five years.
Massachusetts becomes the 33rd state to legalize online sports betting with another eight states having introduced bills to legalize it. States that have legalized online sports betting have reported millions in added tax revenue. The legalization of online sports betting has gained momentum since a 2018 US Supreme Court ruling struck down a federal law against gambling among sports and leagues. The further legalization is also gaining the attention of gambling addiction workers, who are preparing for a spike of people who become addicted. [CBS News]
o Has your body adjusted after losing an hour of sleep when clocks “sprung forward?” Representatives in Congress are looking to end the practice of changing time on a bi-annual basis. The practice adds an additional hour of sunlight during for the spring and summer seasons. It is also thought that Americans would shop more if there was still light after work.
The practice is traced back to World War I when countries adopted the practice to save power and fuel. While it was abolished after the war, it became standard practice by 1966 with the Uniform Time Act. Two states do not observe Daylight Savings Time – Hawai’i and Arizona. Experts say that making Daylight Savings Time permanent would result in potential benefits, including decreased risk for cardiac problems and stroke. [TIME]
