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DEC 2 8 1988

Hot Topics

The Summer of 1988 was "one for
the books." It was a summer of
extremes; a summer characterized
by unrelenting heat, protracted
drought, foul air, and polluted
It was also a summer fraught with
questions and uncertainty. Some
people claimed we were on the
verge of a long-term global warming
trend triggered by the "greenhouse
effect." Others said we were just
having an unusually hot summer.
No one knew for sure.

Nearly everyone agreed, however, that the Summer of 1988 was a
newsmaker. Throughout July and
August, the extreme weather and its
side-effects figured prominently in
the morning headlines and the
nightly newscasts. Moreover, many
of the summer's major news stories
had at least as much to do with economics as with the weather. Some
clearly illustrated how supply-anddemand applies to everyday life;
others attested to the fact that random events, such as prolonged
drought or oppressive heat, sometimes play an important role in
determining economic outcomes. In
one way or another, the Summer of
1988 affected the lives and fortunes
of everyone from big business executives to pensioners.
The severe weather had a particularly dramatic economic impact on
those who live in rural areas. Day
after day, farmers watched the sky
for rain that never came, and, all too
often, even the most prudent lost
their crops to the searing heat and
the lack of rain. Com that normally
should have been "as high as an
elephant's eye" was stunted and

Heal and higher produce prices were only two of the side-effects of the Summer of 1988.
Photo by Wilson Snow

shriveled. Other crops also fared
poorly, and the price of fresh produce skyrocketed.
At the same time, the lack of feed
grain forced many ranchers to ship
their cattle to market ahead of
schedule. The resultant over-supply
of livestock led to a short-term drop
in beef prices that benefited consumers. If, however, the grain shortage continues to push up the cost of
feed, consumers could face higher
beef prices next year.
Yet the ill-effects of heat and
drought were not uniformly distributed across the Farm Belt. Oklahoma farmers, who had suffered so
much in past droughts, were
blessed with fine growing conditions and a bountiful harvest that
allowed them to reap the benefits of
higher crop prices.

Unfortunately, the beleaguered
farmers in other states were in no
position to take advantage of higher
grain prices. The heat and drought
had left them with little or nothing
to sell.
The hot, dry weather conditions
also created hardships for those
who make their living by providing
services to the tourists who visit
western forests and national parks .
More than 1.5 million acres of Yellowstone National Park were lost to
forest fires, and many millions of
dollars were lost when vacationers
cancelled their plans to visit the
scorched fark. (In an effort to make
the best o a bad situation, some travel promotions urged tourists to
visit Yellowstone to see the burned
forest regenerate itself.)
Continued on page 2

Federal Reserve Bank of Boston Vol. 14, No. 3 - December 1988
Federal Reserve Bank of St. Louis

The side-effects of the Summer of
1988 were by no means limited to
the countryside. City dwellers and
suburbanites suffered in their own
way when the oppressive heat and
accompanying air pollution created
crisis conditions in many major metropolitan areas .
Even those who were fortunate
enough to live in air conditioned
homes or work in air conditioned
offices were sometimes unable to
find relief from the weather. The
extraordinary demand for electricity
prompted many offices and factories to curtail their power consumption. Some large businesses
voluntarily reduced their consumption of electricity; others cut back
out of necessity. Results ranged
from stuffy offices and frazzled
nerves to "brownouts" and temporary shutdowns.
In New England, the summer
power shortages fueled debate over
nuclear power. Efforts by environmental organizations and citizens'
groups to close nuclear plants in
Massachusetts and New Hampshire
met with strong opposition from
businesses and utilities, which
claimed that a shutdown of nuclear
plants would lead to even more
widespread power shortages. Moreover, claimed the proponents of
nuclear power, the shutdown of
nuclear plants would contribute to
the "greenhouse effect" by forcing
greater reliance on fossil fuels such
as coal and oil.
The "greenhouse effect" figured
prominently in the summer's news
reports. According to the "greenhouse" theory, waste gases released
during the burning of fossil fuels
form a "barrier" that traps the sun's
heat in much the same way that
glass does in a greenhouse. Many in
the scientific community think the
"greenhouse effect" could produce
a global warming that would lead to
a rise in sea level, coastal flooding,
drought, and crop failures. Faced
with the possibility of nuclear plant
shutdowns, utility company executives were in the vanguard of those
pointing to this summer's extreme
weather as evidence that the
"greenhouse effect" had already
taken hold.
Of course, many of the summer's
developments were far less "earth-

Federal Reserve Bank of St. Louis

shaking" - and seemingly more
immediate - than the "greenhouse
effect." For example, air conditioners quickly disappeared from store
shelves, and sales clerks spent much
of the summer turning away disappointed shoppers. There simply
weren't enough air conditioners in
America to meet the demand, and
display models sold at a premium.
Sweltering heat and widespread
concern over pollution combined to
affect the fortunes of yet another
group - those in the swimming
pool business. As the mercury rose,
daily news.papers and nightly newscasts carried accounts of hospital
waste washing ashore in New York,
New Jersey, and New England. The
thought of swimming amidst discarded syringes, blood samples and worse - prompted even dedicated beachgoers to install backyard
swimming pools. Inventories of
pools and pool supplies were
exhausted much earlier in the summer than usual.

Too Hot to Handle?

A number of complex questions cropf ed up during the
Summer o 1988. The answers
to many of them may ultimately
require Americans to make difficult political and economic
choices. We have tried to frame
some of those questions for discussion, with a caveat that we
don't have any easy answers.
1) According to one school of
scientific thought, the "$'l"eenhouse effect" and holes m the
earth's ozone layer are at least
partly attributable to the burning of fossil fuels and releases of
certain chemicals into the atmosphere. Some people are calling
for much tighter regulations on
power plants that burn highsulphur coal and oil. Others are
demanding more stringent laws
to protect air quality.

At times, it seemed as if the only
remaining summertime pleasure
was to sit under a shadetree and sip
a tall, cool glass of lemonade. But
even that proved to be a problem
during the Summer of 1988 because
the residents of many cities and
towns experienced ice shortages.
Ice companies were sometimes
unable to meet demand, and there
were reports of ice scalping. Some
icemakers raised their prices and
charged whatever the market would
bear. Others, with an eye toward
maintaining good long-term relationships, continued to charge "reasonable" prices and allocated a
certain amount of ice to each of their
regular customers.

If these measures are implemented, economic conditions
could go from bad to worse in
states where the local economy
depends on the mining of highsulphur coal. Furthermore,
ratepayers in many states could
see their electric bills rise
sharply as utility companies fit
power plants with expensive
pollution-control equipment or
search for alternative sources of

All in all, the Summer of 1988 was
a memorable season. Only time will
tell, however, whether it was just an
interesting aberration or a preview
of things to come.

2) The temperature has just
broken 95 degrees for the
eighth day in a row, and there's
no relief in sight. Air quality in
your city is "unhealthful," and

On the other hand, if we do
nothing we could lose valuable
time in dealing with potentially
serious problems. How should
we handle this problem?

Making Deposits, pamphlet, published by the Board of Governors of
the Federal Reserve System, 11

Making Deposits, a new publication
from the Board of Governors of the
Federal Reserve System, is a layper-

air conditioning is a necessity especially for those who suffer
from respiratory ailments.
Unfortunately, some of the
people who need air conditioning the most are also the least
able to pay their utility bills, and
the power company is threatening to turn off their electricity.
What's a solution to this

Copies of Making Deposits are
available from: Publications Services, Board of Governors of the Federal Reserve System, Room
M-P-503, Stop 138, 20th and C
Streets, N.W., Washington, D.C.
20551; or Publications, Public Services Department, T-10, Federal
Reserve Bank of Boston, Boston,
MA 02106. The first 100 copies are

3) During the Summer of
1988, forest fires blackened
more than a million acres of Yellowstone National Park. Some
say the damage was made
worse by a federal policy that
allowed forest fires to take their
"natural" course.

The Economic Education Council
of Massachusetts (EECM) held its
annual meeting on September 29 at
the Sheraton-Worcester Hotel.
Council members from all across
Massachusetts gathered to review
the past year's progress and to plan
for the future.
The first order of a business was to
nominate and elect officers for the
coming year. After brief discussion,
EECM members unanimously
approved the following slate of candidates : George Schlichte, chairman ; Ronald MacDonald , vice
chairman; Joanne Davidson, secretary; George Perry, treasurer; and
Burdette Johnson , assistant

4) You're in the swimming
pool business. This summer
you had your best season ever.
What should you take into
account in planning for next

son's guide to the Expedited Funds
Availability Act. The Act requires all
banks, thrift institutions, and credit
unions to publicly disclose their
check-hold policies. It also specifies
how quickly deposited funds must
be made available for withdrawals.
Federal Reserve Bank of St. Louis

New England
Delegates From Across
Massachusetts Attend EECM
Annual Meeting

Under normal circumstances,
the policy was supposed to
make for a healthier forest, but
this summer's unusually hot,
dry weather was anything but
"normal." As the fires in Yellowstone raged out of control, a
lot of people wondered just
how "natural" national parks
should be. What do you think?

5) Your family has been in the
ice business for years. Some of
your customers have been with
your company since your
grandfather founded the business. This summer there was
an ice shortage for the first time
in your company's history. If
you wanted to, you could have
sold ice at twice the "normal"
price, but you didn't. Why

For copies of Checkbook/et or Bank
Examiner Flimflam, please write to :
Public Information Department,
Federal Reserve Bank of Atlanta, 104
Marietta Street, N.W., Atlanta, GA
30303-2713; or phone (404) 521-8788.
The first 50 copies of each brochure
are free.

Checkbook/et and Bank Examiner
Flimflam: Don't Get Conned Out of
Your Life Savings, pamphlets, published by the Federal Reserve Bank
of Atlanta .
Two new pamphlets from the Federal Reserve Bank of Atlanta are
packed with useful information.
Checkbooklet reviews the history of
checks and offers consumers tips on
writing and cashing checks. In addition, the pamphlet explains how
checks clear, thereby providing useful information for understanding
the Expedited Funds Availability
The second pamphlet - Bank
Examiner Flimflam: Don't Get Conned
Out of Your Life Savings - describes
how con artists use the "bank examiner" or "policeman" scams to cheat
people out of their savings . It also
suggests ways not to fall victim to
the scams.

In a summary of the past year's
activities, Dr. Norman C. Benson
announced that more teachers than
ever are using instructional materia Is from EECM's statewide
Resource Center. Dr. Benson and
Dr. Carol C. McDonough are
EECM's executive co-directors for
educational programs .
Benson also noted that the
Arlington, Massachusetts school
system has been designated a DEEP
school district. (DEEP is an acronym
for "Developmental Economic Education Program.") Designation as a
DEEP school district requires a significant commitment of time and
resources for economic education at
all grade levels.
Looking ahead to the coming year,
Dr. Benson said the Economic Education Council of Massachusetts
plans to: 1) expand the statewide
Conlil1ued on page 4

Check Rights, booklet, published by the Federal Reserve
Bank of Boston, 28 pages.
Checks are a safe, convenient, popular form of payment.
In fact, Americans write
approximately 47 billion checks
a year, and the overwhelming
majority of those checks are
received and paid without any
problem whatsoever. Yet a certain number of problems still
occur, and when they do people
want answers.

Check Rights is a new booklet
that addresses many of the simple and not-so-simple questions
that arise when people write or
receive checks. It is directed at
the millions of consumers and
merchants who need to
increase their knowledge about
the costs and risks in making
and receiving payments with
different kinds of checks.

DEEP network; 2) expand the services of the statewide DEEP network;
3) evaluate the candidacies of two
potential new Economic Education
Centers; and 4) expand outreach
efforts in the area of curriculum
development, graduate education,
and pre-service education.
Those in attendance at the meeting also received an update on new
"products" in the EECM's Resource
Center and on new programs and
materials available from the Joint
Council on Economic Education.
One of the most talked-about new
offerings from the Joint Council was
E3: Economics and Entrepreneurship
Education, a two-year program
designed for "at risk" eleventh and
twelfth graders who may lack the
skills and self-confidence to help
them achieve success . The E3 program includes a summer internship
in which students "learn about the
real world of business under the
guidance of mentors from the business community."
For information on how the Economic Education Council of Massachusetts might be able to help you,
please write to: Dr. Norman Benson

Federal Reserve Bank of St. Louis

Check Rights begins with an
explanation of what a check is
and then describes in detail how
one type of check differs from
another. It also takes a look at
how a check "clears" and what
happens when a check
"bounces." Finally, it reviews
the options open to anyone who
receives a "problem" check,
and it explores ways to minimize the risk associated with
receiving payment in the form
of a check.
Copies of Check Rights are
available from: Publications,
Public Services Department,
T-10, Federal Reserve Bank of
Boston, Boston, MA 02106;
phone (617) 973-3459. The first
10 copies are free; each copy
thereafter is 40 cents. Additional
free copies in reasonable quantities will be made available to
non-profit educational organizations.


and Dr. Carol McDonough, codirectors, Economic Education
Council of Massachusetts, University of Lowell, Lowell, MA 01854; or
phone (508) 452-5000, x2772.

Money Fun For Everyone

The Federal Reserve Bank of Boston will host a free program for families on Wednesday, December 28 at
The two-hour program will feature a puppet show about money
for the younger children, a slide
show on genuine and counterfeit
currency for the older children, a
tour of the Bank's Money Department, a view of Boston from the
Bank's 31st floor, and light refreshments. Children of all ages are welcome, but each child must be
accompanied by an adult.
Participants must register for the
program in advance. For reservations please call (617) 973-3452,
Monday through Friday, 9:00 a.m.

Editor: Robert Jabaily
Graphics Arts Designer: Ernie Norville
This newsletter is published periodically as
a public service by the Federal Reserve Bank
of Boston. The reporting of news about
economic education programs and
materials should not be construed as a
specific endorsement by the Bank. Further,
the material contained herein does not
necessarily reflect the views of the Federal
Reserve Bank of Boston or the Board of
Governors. Copies of this newsletter and a
catalogue of other educational materials
and research publications may be obtained
free of charge by writing: Bank and Public
Information Center, Federal Reserve Bank
of Boston , Boston , MA 02106, or by
calling: (617) 973-3459.