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The er Economic Education Newsletter Federal Reserve Bank of Boston Vol. 20, No. 1 Spring 1994 Economic Highlights of 1993 RE WAS NO SHORTAGE OF ECONOMIC EWS IN 1993. TRADE BARRIERS TOPED IN NORTH AMERICA ANO AROUND ~ THE GLOBE. CITIZENSOF THE FORMER SOVIET UNION AND FORMER DEFENSE WORKERS IN THE UNITED STATES CONTINUED TO GRAPPLE WITH POST-COLO WAR REALITIES. SOME AMERICA S LOST EVERYTHING TO SURGING FLOODWATERS, AND THE FEDERAL GOVERNMENT TRIED TO DEAL WITH A FLOOD OF BUDGETARY RED INK. SEARSCLOSED THE BOOK ON ITS CATALOG SALES UNIT AFTER 97 YEARS, BUT QVC NETWORK AND HOME SHOPPING N ETWORK ANNOUNCED A PLANNED MERGER THAT WAS SURE TO PIQUE THE INTEREST OF STAY-AT-HOME SHOPPERS. JAPAN'S ECONOMY WENT INTO A SKID, ANO D ETROIT TURNED A CORNER IN ITS DRIVE TO MAKE A COMEBACK AGAINST FOREIG AUTO MAKERS. What follows is a recap of last year's economic highlights . As always, the standard caveat applies: We make no claim that ours is the definitive list, nor do we pretend to offer an in -depth analys is of each event. We leave that task in your capable hands. HIGH DRAMA, LOWER TARIFFS l e debate ove r the N orth meri ca n Fr ee Trade Agreement (NAFT A) was like the Superbowl - only more suspenseful. The outcome was always in doubt, and everyone seemed to have a "rooting interest." Erstwh ile third-p arty pres idential cand idate Ross Perot predicted that ratification of the agreement would be fol lowed by the "giant sucki ng https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis sou nd " of U.S. jobs flowin g to M exico . NAFTA backers cla im ed that fai lure to ratify the pact wou ld jeopardize relation s w ith M ex ico (t he third biggest market for U.S. exports) and undercut the president's effectiveness in upcoming trade ta lks w ith Asia n and Europea n leaders. The issue pitted trad itional political alli es against one another and forced habitual foes to set aside past differences . Organized labor, wh ich had backed Bi ll Clinto n's run for the White House, lobbied vigo rously to block th e agreement, and a number of key Democrats declined to support it. Much of the respo nsibility fo r shephe rdin g NAFTA throug h Congress fell to House Republica ns. At the outset, chances for ratificatio n appeared slim. Propon ents gained momentum as th e debate progressed, but even the treaty's most enthusiastic suppo rters were circum spect in their predi ctions. Th e outco me of the final vote took nea rl y eve ryo ne by surpri se . On November 17, the U.S. House of Representatives approved the North American Free Trade Agreement by a co mfortable margi n: 234-200. As a result, tari ffs on 99 pe rcent of the goods traded between the United States and M ex ico will be co mpl ete ly phased out over the next 15 yea rs, and goods and se rvices will move freely across what is already one of t he world 's least fortifi ed borders. (Ca nada and the United States had co ncluded their own free trade agreement in 1989. NAFTA added M exico.) A month later, in December, most free trade propo nents breath ed a sigh of reli ef when a flurry of lastmin ute co mpro mi ses in Geneva, Switzerland brought CATT negotiations to a successfu l conclusion. The so-cal led Uruguay Rou nd of the General Agreement on Tariffs and Trad e (CA TT) had begun seve n years ea rlier, and a hemisphere away, in Punta del Este, Uruguay. Th e CATT talks were schedu led to end in m id-Dece mber, and the re was to be no extension of th e deadlin e. Failure to reach an agreement might wel l have resu lted in retaliatory trade practices and higher ta ri ffs. With only days remaining, negotiators had yet to resolve a number of the most intractable issues. Th e French fought hard (a nd successfully) to retain quotas on the number of America n movi es and TV shows permitted to run on Europea n televisio n, but they also reluctantly agreed to slash subs idies to French farmers. The America ns so ught (unsuccessful ly) to limit government subsidies to Europea n aircraft manufacture rs, but managed to win agreement on a broad range of tariff reductions. In the end, more than 100 nations agreed to a global trade pact that reduced industrial tariffs by an average of o ne-thi rd and addressed such politicall y se nsitive issues as agricultura l subsidies and patent protection. Th e fin al resul t, although less tha n perfect, was certainly preferable to the disruption in trade that might have occurred in its absence. NATURAL DISASTERS: MISSISSIPPI RIVER FLOODS/ CALIFORNIA WILDFIRES BLAZE ls hnological progress sometimes II humans into believing they ave mastered the forces of nature. But then nature asse rts itself and snaps everyone back to reality. Residents of the America n Midwest spent much of last su mmer try ing to cope with unrelenting downpours, rising floodwaters, and mud . The rains began in April and refused to let up for the next three months. Day after day, storm clouds doused the region with in credib le amounts of water, and when the flow of water outstripped the rivers' capacity to channe l it away, the water gushed into far mers ' fields or swa mped riverfront cities and towns. By the end of July, floodwaters had cove red more than 13 million acres and ca used an estimated $10 billion wo rth of damage. Stretches of the Mississippi River were closed to barge traffic for nearly two mon ths. Des Moines, Iowa was without run nin g water for 12 days after th e Raccoon River overflowed its banks and flooded the city's water treatment plant. Com muni ties protected by ex isting levees and floodwall s managed to escape the worst damage. And residents of unprotected commu niti es we re often able to save themse lves by joining together and scra mbling to bui ld temporary levees. But there were times when even the best effo rts of good people could not stem the flow of rising wate r. (Ironica lly, the permanent flood control measures that saved some commu niti es may have doomed othe rs. Some observers contend th at levees a~1d floodwalls forced raging rivers in to narrower chann els, and the resulting bottleneck either forced water back upstream o r se nt it flowing higher and faste r downstream .) Whe n the ra in s finally sto pped and the floodwaters began to subside, people al l alo ng the upper Mississippi and the lower Missouri began to salvage what remained of the ir possessions. The thick, gumbo-l ike mud that covered floors, wa lls, and eve rything else made the task all the more disheartening. All too often, fl ood victims suffe red https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis total financia l loss. According to some estim ates, as many as 80 percent of the people in the Midwest's designated flood-hazard zones had opted not to purchase coverage offered by the National Flood Insurance Program. Although the program endeavors to make such coverage affordable, many wou Id-be purchasers were nevertheless deterred by the cost. Others simpl y had gambled and lost. The cost and magnitude of the cleanup prompted many to question whether or not disaster-prone areas should be rebuilt. It's a question that arose aga in in October whe n more th an a dozen wildfires scorched the hi ll s and ca nyons surrou n~ ing Los Angeles. W indswept flames reduced milli on-do ll ar houses to ashes in a matter of minutes. Total damage estim ates exceeded $500 mi ll ion. A number of the blazes may have been set deliberately; o ne was sparked acc id enta lly by the campfire of a hom eless man trying to keep warm. But in many respects, the Ca liforni a confl agration was a natural d isaster Much of the cou ntryside has been described as a "natu ral tinderbox." The least little spark can ignite the chaparral, sage scrub, and oth er underbrush that is so prevalent in the region. And when hot, dry Santa Ana winds blow in off the Mojave Desert, they act as a natural be llows and fan the fl ames. For as long as anyone can remember, seasonal wi ldfires have burned off the o ld un dergrowth to make way for the new. It's the natural scheme of things. Th e problem is that houses now dot the fire zone - big, expensive houses. And whe n the fires sweep th rough, as they always have, a lot of high-priced rea l estate goes up in smoke. Alth ough Cali fornia 's wildfire victims and the victim s of other natural disasters are al most always eager to pick up the pieces and get back to the way th ings we re, in surers and governm ent officials are beginning to question the wisdom of rebuild ing in locatio ns that are so prone to natural calam ity. Last April, in what may be the start of a trend , Allstate Insurance announ ced pla ns to let policies lapse for 300,000 of its Florida customers. All state's anno un ceme nt came less tha n a year after Hurricane Andrew had leve led parts of so uth ern Florida. REVERSAL OF FORTUNE: JAPANESE ECONOMY SPUTTERS D uring the 1980s, the Japanese could do no wrong. The world rushed to buy Japanese products, which had ea rn ed a we ll deserved rep utati o n for qu ality and value, and Japan made the transiti o n from economic powerho use to economic superpower. Japan's most spectac u la r run of prospe rity occurred between 1986 and 1990. The Japanese stock market skyrocketed, and the Japanese real estate market boomed. The run-up in sha re prices was especia ll y noteworthy because Japanese investo rs had long been wary of investing in stocks, preferring in stead to keep their money in the bank. Flu sh with new wealth, Japanese consu mers went on a spe nd ing sp ree. Car sa les in Japan jumped from just over 3 milli on in 1987 to ju st under 5 million in 1990. Econom ic success also tra nslated into a renewed sense of se lf-confidence and natio nal pride. The Japanese began to talk more openly of asserting greater influence in world affairs. Then, in 1990, Japan bega n to expe rience a full-blown eco no mi c downturn. Th e Japanese stoc k market's Nikkei average (a rough eq uivalent of the Dow Jones average) plummeted from a peak of 38,915 in 1989 to a low of 14,309 in August 1992. Real estate values tumbled as we ll , and ba nks struggled to cope with the resulting increase in bad debt. At the same time, many Japanese industries faced stiff co mp etiti o n from Pacific Rim countries with lower labor costs . In the face of all these new d ifficulties, Japanese consu mers turned conservative, and compa ni es looked for ways to cut jobs-a drastic step in a cou ntry where people expect to stay with the same employe r fo r life. Japan's econom ic woes also prompted talk of a comeback for Detroit's "B ig Three" -Gene ral Motors, Ford, and Chrysler. Since th e 1970s, Japanese auto manufacturers had consistently topped Detroit in pri ce, re li ability, and styling. America n nameplates rarely appea red in the top ten of anyone 's custome r satisfacti on su rvey. A growin g number of U.S. car buye rs refused for only 14 percent of the South African popu lation, whites own 90 percent of the land and nearly 90 percent of the establis hed businesses. They have enjoyed one of the world 's highest standards of living, while the black majority has endured grinding poverty and politi cal repression. The international co mmun ity expressed its opposition to apartheid through economi c and cu ltural sanctions. More than 200 U .S. compan ies left South Africa between 1985 and 1990; some because they disapproved of apartheid, and others because they feared for the future or because they experienced political and economic pressure at home. South Africa 's whites responded to the sanctions by tu rning inward and settling into a siege mentality. Despite their growing isolation, they showed li ttle inclination to relinquish power or privil ege to the cou ntry's black majority. A violent showdown between the two groups seemed inevitable. Th en, in 1990, the situation began to cha nge more rapid ly than anyone could have predicted. Nelson Mandela, leader of the Afr ican National Congress (ANC), was released from prison after be ing held since the early 1960s for advocating armed resistance to apartheid. And by the end of 1991, leaders of the country 's diverse political factions had entered into discussions over the transition to a multiracial society. A key facto r in bringing them together was their shared concern over South Africa's deteriorating economy. Last yea r's developments in South Africa were no less than stunning. In June, black and white politicians announced an agreement to hold the country's first all-in clus ive, multiracial elections on Apr il 24, 1994. In September, the South African Parliament ratified a power-sharing agreement with the ANC, and Nelson Mandela called for an end to economic sanctions against his cou ntry. And in November, Presid ent Clinton lifted all remaining U.S. sanctions. Of co urse, there are still many difficu lties ahead. South Africa's https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis economy is in the grip of a seve re recession. Nearly half of its black population is unemployed . The politica l rift between Nelso n Mandela's ANC and Zu lu Chief Mangosuthu Buthelezi's lnkatha Freedom Party appears to be deepen ing. And diehard South African wh ites are demanding a separate state. But for all th at, there are sti ll signs of hope. Nelson Mandela conti nues to display political courage and a remarkable capacity to eschew bitterness. South African President F.W. De Klerk co ntinues to display an eq ually remarkable capacity to break free of the belief system t hat kept apa rth eid in place for more than 40 years. And both leaders seem to rea lize that a peacefu l transition from apartheid to full democracy depends largely on their wi ll ingness to implement viable econom ic policies and attract foreign investment. Omen Rmun10N: PARTING THE SEA OF Rm W hen Ron ald Reagan took office in 1981 , the national debt was just under $1 trillion. By the time Bill Clin ton moved into the White House twe lve years later, the debt had mushroomed to $4.4 trillion. Throughout the 1980s, federa l budget defi cits routin ely topped $200 billion. Politicians, economists, finan cia l analysts, central bankers, and average citize ns all predicted di re co nsequences if the trend were to continue. But budget deficits and the federal debt are issues that are easier to address in the abstract than in actuality. Reducing spending and raising taxes are two th ings that most politicians would prefer to sidestep, and w ith good reaso n. Talk of meani ngful spending cuts mu st eventually get around to entitlements - socia l security, Medicare, the home mortgage interest deduction - and each of these has a powerful co nstituency. Any poli tician w ho votes to raise taxes is giving his or her oppon ent a powerful weapon to use in the next election. Last year's Congressional debates over deficit reduction illustrated the comp lexity of the problem . Both the House and the Senate narrowly approved deficit reductio n packages, but the two were decidedly different. The House ve rsion, w hich passed in May by a vote of 219-213, included a broadbased tax on energy consumption. A month later, the Senate version rejected the energy tax in favor of a much narrower tax on gasoli ne and diesel. Aga in , the vote was close, 50-49, with Vice President Gore castingthetie-breakingvote. Still in doubt, however, was the question of whether or not the House and Senate cou ld reconci le the ir bills. The President and his staff lobbied hard for passage of a comp romise bi ll. In their view, the future of the Clin ton presidency was at stake. Defeat of the deficit reduction measure wou ld likely hinder the Administrat ion's effectiveness in upcoming battles over NAFTA, health care, and other key issues. The deciding vote came in August, and Vi ce President Gore was again ca lled upon to break a tie (5 0-50) in the Senate. The comp romise deficit reduction package conta ined the following key provisions : • The tax rate for individuals earning over $115,000 went from 31 percent to 36 percent ($ 140,000 for couples). Those earning more than $250,000 also faced a 10 percent surcharge. •Th e federal tax on gasoline and diesel fuel jumped by 4.3 ce nts per gallon, raising the total to 18.4 ce nts per gallon on gasol ine and 24.4 cents per gal lon on diesel. •Approximately 5.5 million retirees saw taxes increase on their Social Security benefits. In addition, defense spend ing was cut further, and the rate of increase in the Medicare budget was slowed, w hich means that Medicare spending will probably grow by $272 bifl ion instead of $328 billion over the next five years. And in spite of all that, most Washington observers believe last year's deficit reduction package was only the begin ning of what prom ises to be a long and difficult process. O traffic-contro l talents of one of America's most technica lly sophisticated telephone companies. The possibilities inherent in such a partn ership ra nge from the mundane - ordering up your favorite old television program at 2:00 a. m. from a video library - to the exotic. Imagine being able to book seats for a performance at an un fa mili ar theater without having to dea l with a su rl y ti cket agent. Th eoreticall y, an interactive video syste m would not only enable the customer to order tickets but also to check out the sightlines of the ava il able seats by using virtua l rea lity technology. Of course, it remains to be see n whether or not a merger between two very different com muni cations giants is economi ca lly viable. But one thing already see ms ce rtain : The technologica l pote ntial wil l be limited only by th e human imagination and customer demand . NoTE: The Bell Atlantic/TC/ merger collapse d in February 1994. Both companies blamed the deal's failure on the Federal Communication Commission 's decision to back a 7 percent reduction in cable 1V subscriber rates, which the companies feared would make the union economically unfeasible. But "cold feet" and concern over the fit between two very different corporate cultures might also have been factors. In any case, the collapse of the Bell Atlantic/TC/ merger could well be one of 1994's economic highlights. ADJUSTING TO THE END OF THE COLD WAR C omm uni sm co llapsed, th e Cold War ended, and nea rl y everyo ne looked ahead to a brighter, more prospero us future. Sounds like a happy ending to a sto ry that lasted more than 40 yea rs. But so me stories never see m to end. The difficu lt process of adju sting to post-Cold War rea li ties continued to make headlin es in 1993. Tensions rose to a new level in Russia, where President Boris Yeltsin dissolved Parl iament in September and call ed for new elections. Yeltsin blamed Parliament fo r blocking economi c reform s. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Parliamentary deputies responded by elevat ing Yelts in 's voca l oppone nt, Vi ce Presid ent Alexand er Rutskoi , to the presidency after voting to strip Yeltsin of power. Th e reca lci trant deputies then barri caded th emselves inside Parlia ment, and a two-week sta ndoff ensued . Th e sta ndoff end ed when Russian paratroopers, backed by T- 72 tanks, blew out all 500 of the parliament building's windows, settin g it ab laze and forci ng its occupan ts to surrender. Those who opposed Ye lts in did so fo r a variety of reasons. Some we re nationali sts dismayed by the Soviet Union 's sudden disintegration and its loss of superpower statu s. But many othe rs w ere "votin g t heir pocketbooks" wh en th ey defied Ye ltsin 's ord er to disso lve pa rli ament. Some were old-lin e co mm unists seeking to retain their influ ence and perso nal privil ege; others believed Yeltsin 's economi c reform s were progressin g too rap id ly and ca usin g undue hard ship. The transition to a market economy had begun durin g the late-1 980s and had been ardu ous. Last January prices rose by 28 percent a month, which translates in to an annual rate of more than 1,800 percent. By December, the rate of in crease had moderated to 12 percent a month, but in order to win that improve ment the government had sharpl y cu rtailed industrial su bsid ies and other progra ms intended to soften the impact of econom ic change. Th e politi cal cost of pu rsuing such a co urse became apparent when Russ ian voters went to th e po lls in December 1993. They narrowly approved a new constitution th at greatly expanded Yeltsin's powers, but they also voted in large numbers for co mmunist and ultranationali st ca ndidates fo r parliame nt. The Liberal Democrati c party headed by ultranationali st Vlad imir Zhirin ovsky fared surpris ingly well, in large part beca use of voter dissatisfaction with reformi st economi c policies and Russia's dimini shed status as a world power. Reportedly, Zhirinovsky had once said he would erect giant fa ns on Russia's border with Lithu ania in order to blow toxic gases toward the Baltic state. Needfess to say, his strong showing in the elections raised co n- ce rns in Europe, the United States, and the former Soviet republi cs . Th e end of the Cold War also had a signi ficant, if less dramatic, effect on th e U.S. economy in 1993. With the collapse of the Soviet Union and Easte rn Bloc co mmuni sm, Co ngress and the pres ident were free to look fo r ways to trim U.S. defense expenditures. In the abstract, most America ns see med to agree that the defense budget co uld be cut without endangering national secu rity. But specific cuts were another matter altogether, because defense cuts ultimately meant job losses and economi c dislocatio n. Secti ons of the co untry such as Ca li forni a and New England, w hich had prospered during the defense bui ld-u p of th e 1980s, w ere hit first and hit hard est by the defense cuts of the 1990s. But last year the pain spread whe n th e Pentago n announced that 31 major military bases wo uld close and 134 others would face cutbacks. Th e base closings could eventuall y save the taxpayers more than $3 billion a yea r, but thousands of defense workers will lose their jobs and civi li an businesses in th e affected communiti es wi ll face a bleak future. There is so me hope of converting defense plants and military bases to oth er uses, but beating swo rd s into pl oughshares is no easy task. Defense contractors are involved in a hi ghl y specialized business. Produ cin g military hard ware to Pentagon specifications is a fa r cry from se llin g co nsumer goods in a highly co mpetitive market. And even the most creative approaches to recycl ing old mi litary fac ilities probably won't help the 58-yea r old w ho's spe nt th e past 35 years we lding nuclear submarin es. THE UNITED STATES ENDS ECONOMIC SANCTIONS AGAINST SOUTH AFRICA E or more than 40 years, South Africa's white minority has controlled that country's govern ment and economy through a cruel system of racia l separation known as apartheid. Although they account to even consider bu ying American, and by 1990 Japanese car companies had captured nearly 25 percent of the U.S. auto market. But in 1993, after years of trying to catch up, an entry from the "Big Three " once again became the top-selling car in the United States w hen Ford Taurus nosed out Honda Acco rd . And for the first ti me in years, the Japanese share of the U.S. market had begun to slip. Detroit's renewed focus on value and qualitywaswinningbackAmerican customers - with a little help from the foreign exchange markets. During the mid-1980s, the exchange rate was approximately 240 yen to the dollar, but by 1993 it had fal len to 110. In simple terms, a pricetag of 3 million yen translates into $12,5 00 when the exchange rate is 240, but when it drops to 110 yen per dollar, 3 million yen equals$27,000. At that rate, manufacturers must reduce profit margins and develop innovative strategies in order to mai ntain market share - which the Japanese have done to a remarkable extent. One response has been to build many more cars in the United States: Toyota Camrys are built in Kentucky, Honda Accords are assembled in Ohio, and Nissan Altimas are put together in Tennessee. N everthel ess, a typica l mid-priced Japanese ca r sti ll costs more and is often less well-equ ipped than its American competiti on. In short, the outlook for America n auto compa ni es is brighter than it has been in years. But in view of the resilience, the ingenuity, and the commitment to quality that the Japanese have demonstrated, Detroit ought not to spend much time ce lebrating its comeback. CHANGING THE WAY AMERICA SHOPS: DEMISE OF THE SEARS CATALOG/ BIRTH OF THE INFORMATION HIGHWAY he height of the Co ld War, New York Tim es co lu mnist ar ri so n Sali sbury offe red a tongue-in-cheek alternative to massive defense spendi ng: Send U.S. planes to drop milli ons of Sears cata logs on the Soviet Union. The eye-popping array of readi ly available consumer goods wou ld convert the Soviets from communism to capitalism in no time. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Today, the Soviet Union and the Sears catalog are both gone. Soviet communism collapsed during the late-1980s, and the Sears cata log met its demise last year. Of the two, Sears' "big book" lasted longer and is more fond ly remembered. (The catalog, which made its debut in 1896, predated the Bolshevik revolutron by more than 20 years.) At one tim e, on ly the Bible graced the bookshelves of more American homes. The Sears catalog brought the outside world to isolated farms and out-of-theway smal l towns that the rail roads and the main highways had bypassed. It offered shoppers whatever they needed or wanted - everything from wate r pumps to ready-made curtains. The "big book" was an American institution, but like many in stitutions it was slow to recogn ize that t imes change. During the 1980s, when smaller catalog compan ies were ta rgeting specialty markets and making catalog shoppi ng as easy as poss ible for busy co nsumers, Sears continued to publish its 1,500page catch-a ll edition and dragged its feet on adopting a 24-hour toll free number for telephone sa les. By 1992, Sears' catalog division was $175 million in the red (even though sales for the year topped $3 bill ion). To make matters worse, Sea rs, which had long been America 's largest retailer, had fa ll en to number three, behind W al-Ma rt and K-Mart. Faced with the need fo r drastic acti on, Sears' new chai rman began 1993 by doing away with the cata log unit - a move that wou ld close 113 sto res and eliminate 50,000 jobs. But new ways of marketing and deliveri ng goods, services, and information co ntinued to evolve last yea r. In July, Ame ri ca's two largest video retailers, QVC and Home Shopping Network, announced plans for a $1.2 billion merger wh ich cou ld boost the prospects of an industry th at has yet to rea lize its fu ll potentia l. Gross sales for all video retailers topped $2 billi on in 1993. That's not bad for an industry that didn't eve n exist 15 yea rs ago, but the figure could be much higher. Part of the problem is that home shopp ing chan nels don't attract as many viewers as they cou ld, nor do they attract the most affluent. Since its debut in the ea rl y 1980s, video retai ling has grappled with the age-old shopkeeper 's chal lenge of "getting customers into the store. " Only a relatively sma ll pe rcentage of all TV viewers watch home shopping cha nnels, in part because TV shopping still suffers from an image problem ; call it the "cubic zirconia syndrome. " Shoppers search ing for value and quality are likely to look elsewhe re, put off by the combination of middling merchandise and bare bones production techniques that owe more to commun ity access television than to MTV. The QVC-HSN merger could change al l that by giving the new compa ny sufficient fi nancial resources to establish an interactive video equivalent to a super Sears catalog. Instead of placing a telephone order for whatever the home shopp ing cha nn els choose to showcase, viewers cou ld electronicall y browse the wares of any outlet or vendor that signs on with QVC-HSN and then place an on-line, on-screen order. Even bigger changes appeared to be on the way last October when Bell Atlantic Corporation and Tele-Communications Inc. (TCI ) ann ounced plans for a $33 billi on dollar blockbuster merger. Bell Atlantic is one of the so-called " Baby Bel l" regional phone companies created by the AT & T break-up, and TCI is the nation's largest cable TV operator. The union of a major telephone co mpany and a cable TV giant could revolutionize the way Americans li ve, work, play, and shop. In an article for the October 14, 1993 edition of the New York Times, reporter Joh n Markoff explains w hy: Currently, cable networks have the capacity to carry hundreds of channels of television programs or other information, but most cable systems are not very good at letting consumers send information back over the network, whether to order a movie or play video games with other cable customers. Telephone "channels," by contrast, can handle only limited amounts of information, but they have an almost magical ab ility through switching systems to let anyone on the network communicate with anyone else. Therein lies the promise of this megamerger, which will blend the information cargo-carrying capacity of the nation 's largest cable company and the .. The Basics of Foreign Trade and Exchange, booklet, published by th e .-: Federal Reserve Bank of New York, 48 pages. .' «- . The mere mention of the words "foreign trade " or "foreign exchange" is enough to induce flu-like symptoms in most Americans; perhaps because the topic seems arcane and intimidati ng. But a new publication from the Federal Reserve Bank of New York offers a remedy. The Basics of Foreign Trade and Exch a nge is inte nd ed to introduce high school and junior college students to key concepts and fundamental issues related to trade, com parative advantage, competitiveness, exchange rates and currency trading, and the free trade vs. protectionism debate. And it does so in a way that makes the material interesting and accessible. : / 1. fl. ,,\, Making Sense of Savings , brochure, published by the Board of Governors of the Federal Reserve System. The Federal Reserve Board has prepared a new broch ure to help consumers understand their options and make better decisions about how and where to save their money. The brochure, entitled Making Sense of Savings, describes the various savings instruments that are available and explains their features - including fees and interest rates. It also covers the major features of the Truth in Savings Act. For a free copy of Savings Makes Sense, write to: P UBLICATIONS FEDERAL RESERVE BANK OF B OSTON P.O. Box 2076 Most buyers finance their houses with mortgages and pay for their cars with loans. College students often borrow to pay their tuition bills. And lots of people use credit cards to make purchases. Of cou rse banks and other lenders never know for sure if they will be repaid, but they ca n narrow the odds by looking at whether or not a potential borrower has repaid past debts. To obtain this information, lenders rely heavi ly on credit bureaus and cred it reports. What Your Credit Report Says About You, a new pub licatio n from the Federal Reserve Bank of Philadelphia, takes the mystery out of credit reports and cred it bureaus by explaining what they are and ::.fl', describing the in formation contained in a cred it report. It 51 ;:;:::::f also explains how to obtai n a copy of yourcred itreportand 'Z ~ what to do if it contains an error. ~m e::::::: • BOSTON, MA 02106-2076 Basics is available free of charge to educators and stude nts. For nonclassroom use, the first copy is free, add itional copies cost $1 each. To request copies, contact: ORPHO E(61n973-3459 Multiple co pi es for classroom use are also available free of charge. For a free copy of What Your Credit Report Says About You , write to : PUBLICATIONS P UBLIC INFORMATIO F EDERAL R ESERVE BANK OF PHILADELPHIA PUBLIC I NFORMATION D EPARTMENT P.O. Box 66 FEDERAL R ESERVE BAN K OF NEW Y ORK 33 LIBERTY STR EET N EW YORK, NY 10045 EDITOR ROBERT )ABAILY GRAPHIC DESIGNER KRI STEN T AYLOR YARRANTON https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis What Your Credit Report Says About You , brochure, published by the Federal Reserve Bank of Philadelphia. his newsletter is published eriod ica lly as a public service y the Federal Reserve Bank of Boston. The reporting of news about economic ed ucation programs and materials 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 PHILADELPHIA, PA 19105-0066 OR PHONE: (215) 574-6 11 5 and research publications may be obtained free of charge by writing: PuBuc AND COMMUNITY AFFAIRS FEDERAL RESERVE BANK OF BOSTON P.O. Box 2076 BOSTON • MASSACHUSETTS 02106-2076 OR BY CALLING (617) 973-3459
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