What is The Federal Reserve Bank?

The Federal Reserve Bank – What is it Really?

Author:Tom Genot

The Federal Reserve is one of the largest problems facing America today. The one question many people ask is what does a Federal Government Bank have to do with our nation's problems? For starters it is Federal in name only.

[caption id="attachment_1100" align="aligncenter" width="500"] What is The Federal Reserve Bank?[/caption]

The Federal Reserve Bank is not part of the US Government. It is actually a privately owned corporation and international bank that was created by Congress in 1913. The passage of the 16th amendment was passed rather shadily, and according to some, illegally. Furthermore it was given the exclusive rights to 'print money' for the U.S. Government by Congress, during the Christmas break in 1913 when most of the representatives were on vacation.

Before the creation of the Federal Reserve the power and responsibility to print our nation's money was done by the Congress of the United States. Sadly since the time when the Federal Reserve was given the power to operate the printing press, the people of America have continually been charged interest on every dollar ever printed. This interest does not go to the Federal Government to benefit Government programs or pay down national debt. It goes directly to the 'cartel banking families' that own the Federal Reserve.

Furthermore the Federal Reserve is responsible for the continuous loss of purchasing power that the dollar has suffered for decades which was done by printing excess money. Since 1971 the US dollar has lost the backing of gold, now it's just created out of thin air. This excess money when added to the Americas money supply 'waters it down' making the total value of the currency weaker so you need more of it to buy something, this is called inflation. Here is the real kicker, the total sum of the United States national debt in all actuality, is the outstanding interest still owed to the Federal Reserve that the American people get stuck paying.

So what does the Federal Reserve do? Well their official roll other than money printing is also to provide a means that will control the amount of money that enters the economy. It is a fine balance that borders between an excess amount of currency creating inflation and not enough creating a recession. The Fed 'when acting responsibly' provides the counter balance to keep inflation and recession in check.

The Federal Reserve is a secretive collection of private banks that have Federal authority. They have no government control or oversight and are accountable to no one for their actions. They pretty much operate in secret keeping the money supply flowing steadily between the exceptionally rich, financial markets, banks and consumers. This is done while they react to both national and international political pressures. The Federal Reserve's meetings are always held in private where decisions are made without any outside input. These decisions ultimately and directly will affect the economic welfare of each person in the nation as a whole.

The Fed also incorporates other mechanisms or tools that can be put to use when necessary. One of the tools that will generate a great deal of attention has to do with the interest rates for banks in particular commercial banks. News of the Federal Reserve changing its interest rates always seems confusing even deceptive to many. However these rates will affect commercial banks which pay the Fed's rate to borrow money thus may or may not directly affect the consumer.

In summary America's biggest problem is actually the Federal Reserve itself. Our congress nearly 100 years ago sold America out by handing over great powers to the corrupt international banking elite, which in-turn have only compromised the well being of our entire economy. It is profit and power first that drive these 'international thieves'. The banking elite are an international group of bankers from several countries and none of them are from America. Therefore they have zero loyalty to American interests nor the American way of life. It is nationalism itself that hinders their business interests.

It was many years ago when one of our founding forefathers actually warned us about the dangers of private banks coming into power. But did we listen?

'If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.' - Thomas Jefferson

Apparently Not!

Tom Genot -

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About the Author

Informational news, books, articles and videos on investing in gold and silver and where the best places are to buy it. You will also find informational resources to educate you on alternate forms of investing and information on preparedness, for preparing and protecting you, your family and your assets from the pending economic crises and destruction of the US dollar. Author Tom Genot provides information and resources helpful to everyone. Insure you're prepared, while time is still on your side. Check us out at www.coinbullion.net.

What is The Difference Between Currency And True Money?

What is The Difference Between Currency And True Money?

Author:Tom Genot

Currency has been defined as a circulating medium of exchange, used as an intermediary in trade, so to avoid the use of a barter system. The benefits and usefulness of currencies include; being a unit of account, or standard measurement of value. Other key factors include; durability, divisibility, ease of transportation and being fungible, or capable of mutual substitution.

[caption id="attachment_1097" align="aligncenter" width="500"] What is The Difference Between Currency And True Money?[/caption]

True Money however, is defined as having all the attributes above, however with one major difference. Money is also a store of true value. Paper currency is actually designed to lose value while true money is designed both to hold and store value. Gold and silver meet these special requirements and have been true money for over 5,000 years, thus they will forever be in demand.

Fiat currency is not true or real money; it only has value because of government regulation or law. The word fiat is actually derived from the Latin word meaning ‘let it be done\'. Thus fiat money is actually established by government decrees. In America, no fiat currency has ever survived more that 40 years, since its start in America, during the days of the Continental Congress, before the Revolutionary War. America\'s current fiat system is the dollar system which started in 1971. It has now in-place over 41 years thus; now it\'s already overdue for failure.

Debasement of currencies is accomplished by nations. Through which, additional fiat money is created then added into the existing nation\'s money supply. Currency debasement is just another fancy word for money expansion. The end result of this expansion, through central bank efforts to debase currencies, always ends up with inflation. The more the paper currency is debased, the greater inflation upon the society becomes. This further drives up the real costs of goods and services, while lowering the purchasing power of the nation\'s currency in real-time.

How can an investor protect oneself from further monetary debasement and inflation? The answer is actually thousands of year\'s old, own gold and silver. Both these monetary metals protect your assets from currency de-basement and because they are real stores of value. They can also protect you from the collapse of currency regardless if it comes from inflation, deflation or the destruction of the paper currency itself, through hyperinflation.

Holding these two precious metals in physical form outside the banking systems of the world, allows you ultimate freedom and complete control. These precious metals also become the best possible insurance for asset protection or hedging that money could ever buy. The biggest reason is due to the unique characteristics these precious metals hold. Always allowing for them to consistently seek their true value, regardless of any economic conditions.

Tom Genot –

Article Source: http://www.articlesbase.com/banking-articles/what-is-the-difference-between-currency-and-true-money-6270459.html

About the Author

Informational news, books, articles and videos on investing in gold and silver and where the best places are to buy it. You will also find informational resources to educate you on alternate forms of investing and information on preparedness, for preparing and protecting you, your family and your assets from the pending economic crises and destruction of the US dollar. Author Tom Genot provides information and resources helpful to everyone. Insure you\'re prepared, while time is still on your side. Check us out at www.coinbullion.net.

What is Goodwill on a Balance Sheet?

What is Goodwill on a Balance Sheet?

By Preston G Pysh

There are a variety of different lines on a balance sheet, and if you really want to understand the sheet in its entirety, it is vital that you understand each line.

[caption id="attachment_1037" align="aligncenter" width="605"] What is Goodwill on a Balance Sheet?[/caption]

Understanding each line goes further than just knowing what it means. You should also learn how it can affect you. Let's start by taking a look at the Goodwill line on a balance sheet. This is one of the lines that is most often misunderstood. Some people have even misunderstood it to be the amount of money that businesses donate to charity. This is very far from the real meaning of Goodwill on a balance sheet.

The easiest definition of Goodwill on a balance sheet is basically what comes about when two companies merge together. Two separate businesses merge together, and this can create some confusion for some people. Let's say the first business is buying out the second business. When this happens, there is a lot more to it than simply merging together. The first business will start by determining the worth of the second business. Then, they deduct any liabilities owed by the second business, because these will also be transferred with the merge.

It is key to remember that when companies merge together, the balance sheets are also merged together. When buying out another business, the amount paid for the business is likely going to be more than the actual book value of the business. This is due to the stock value of the business. The difference between these two values will give you the Goodwill value. While the assets of the new balance sheet will be higher, so will the liabilities. These are all things that should be taken into consideration when a merge is in question.

The Goodwill value can sometimes be highly inflated, especially if the stocks for the business are highly inflated. This can prove to be quite deceiving for the buying company, but can ultimately cause the other company to make a larger profit on their business. The best way to avoid paying too much for a business is by analyzing the stock markets and market shares well in advance. It is also a good idea to recognize the trends in the stocks before making a concrete decision.

The Goodwill value is generally included in the assets of the business, along with tangible assets. It is a different type of asset. It is definitely not one of the tangible assets that can be sold during economic downturns when you need to raise money for your business. Considering the fact that stock prices can change on a day to day basis, some businesses end up losing money when they buy out another business when the stock shares are priced higher.

If you have ever been baffled about the Goodwill line on the balance sheet, this should help to put any questions that you may have had to rest. It is definitely something that many people misunderstand. A misunderstanding of this line can have detrimental results for the profitability of a business.

If you would like to learn more about goodwill on a balance sheet, be sure to click on this link because it provides more information and a wonderful video on how it applies to Warren Buffett style investing.

Also, if you would like to learn how Warren Buffett invests, this link takes you to a comprehensive site that teaches his investing techniques.

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What is a Balance Sheet and How Can I Use It for Investing?

What is a Balance Sheet and How Can I Use It for Investing?

By Preston G Pysh

A balance sheet is a financial statement that provides information about the company's assets and liabilities and the shareholder's equity. There is a specific formula that all sheets follow. Basically, the assets of a company equal the liabilities plus the equity of the shareholders. The point of a balance sheet is to ensure that both of the sides balance out to be equal. The company will have to pay for their assets by using loans or shareholders' equity.

[caption id="attachment_1033" align="aligncenter" width="500"] What is a Balance Sheet?[/caption]

Let's take a closer look at the three main components that make up the sheet.

Company Assets

A company's assets are basically the items that the company owns that are valuable, and in most cases they were paid for by the company or donated to them. There are many different asset types. These include cash assets, receivables, property, and many others.

Company Liabilities

A company's liabilities include the items that the company must pay out to other people, including other businesses, individuals, or government agencies. There are many different liability types. These include current liabilities, short term liabilities, long term liabilities, and many others.

Stockholders' Equity

A company's stockholder equity is basically the amount of money that investors have put into the company. Some of this will also include profits that the company has kept to use for new projects that are business related.

Sheets are used to reconcile accounts. Assets should always be equal to the amount of liabilities and equity. Therefore, the equation is A = L + E, or Assets = Liabilities + Equity. It is fairly simple to understand.

A balance sheet can also be used to see where a business stands financially. Investors should always be aware of the businesses that they entrust their investments with. A good way to ensure that you are making wise investment choices is to take a look at the sheet to ensure that they even out. Shareholders will definitely want to know where they stand on these financial documents.

Another group of people that commonly view these finances are potential creditors. Creditors that help out businesses will want to know that a business is able to check and balance their assets and liabilities. This helps to show them that they are making wise loans to the business.

Analyzing a balance sheet may not be as easy as it sounds. The best way to analyze these sheets is through the use of ratio analysis. There are three different ratios to consider. These include class liquidity ratios, solvency ratios, and profitability ratios. Each of these ratios shows a particular business aspect.

If you really want to improve your business and investment moves, then you will want to make sure that you focus on learning the in's and out's of the balance sheet and how they can affect you. Don't glance blindly at a balance sheet without understanding how to properly analyze it. This can be very detrimental, especially for people who are new to investing.

If you would like to learn more about what a balance sheet is, be sure to click on this link because it provides a great video lesson on the subject.

Also, if you would like to learn investing like Warren Buffett, this link takes you to an in-depth site that teaches his investing approach through 10 hours of YouTube videos.

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What is a Cash Flow Statement?

What is a Cash Flow Statement and How Can Investors Use It to Their Own Advantage?

By Preston G Pysh

The cash flow statement is a statement produced by the public companies on an annual basis in order to identify the inflows and outflows of cash. As opposed to the income statement that identifies the profit for the year, the cash flow statement provides a true picture of the cash in hand of the business. Thus, this statement is useful for understanding the liquidity position of the company. The cash balance presented in the balance sheet is tied with the profit shown in the income statement and therefore the cash statement provides a link between the statement of financial position and statement of comprehensive income.

[caption id="attachment_1030" align="aligncenter" width="500"] What is a Cash Flow Statement?[/caption]

The cash flow statement identifies various sources of inflow and outflow of cash which are categorized into three major aspects namely operating, financing and investing flows of cash. The operating activities measure the cash that arises as a result of business operations and this starts with the profit after tax as reported in the income statement. Non cash expenses such as depreciation are added back to the PAT whereas accruals of interest and tax expense are adjusted so that the cash outflow is determined.

Changes in the working capital are identified and these are also adjusted accordingly in order to arrive at cash generated from operating activities. The next component of the statement is the investing cash that largely pertain to the capital transactions of the business. Any purchase and sales of property, plant and equipment is recorded in this section in order to identify the net cash from financing activities. Lastly, the financing section highlights the business transactions that are meant to raise finance such as debt issue, equity issue or loan repayment. The financing section highlights the changes in capital structure that came about in a given year. The net result of the cash from operating, investing and financing activities is the cash flow generated during a given year. This is then added with the balance at bank at the year start so that the balance at the year end is computed. This is then verified with the balance shown in the current assets within the balance sheet.

The cash flow statement is of immense importance to the investors as they can identify transactions that are not depicted in the balance sheet and income statement. The company's cash position determines the liquidity of the firm and the change in cash from year start to the year-end would help the investors in identifying the change in liquidity position. An assessment of the liquidity would enable the investor to identify the ability of the business to pay off its debts with ease.

The cash flow statement can also be used by the investors to identify the free flow of cash within a business. This information is not presented by the income statement that is based on the concept of accruals and prudence. The free flow of cash within a business would help in identifying the true cash that's generated as a result of the operations after the deduction of any capital expenditure that is required to maintain the operations of the company. Low or negative cash flows would indicate the lack of operating efficiency of the business and therefore investors must analyze the FCF of a given firm over a period of time.

The cash flow statement is also an indicative of the current capital expenditure policy of the firm. The investing section would highlight the expenditure on equipment. A negative or a positive investing cash flow does not indicate the true position of the company. A negative cash flow might arise as a result of high capital expenditure in a given year whereas a positive investing cash flow could come about as a result of sale of equipment. These are one off items and must not be used as a means to assess the liquidity position of a company. An investor can therefore identify the underlying reasons for negative or positive cash flow and therefore ascertain the future stream of cash flows. For example, a large outflow in the present year might result in low or negative cash balance but it is likely to result in more efficient operations which would enhance profitability and thus earning per shares. The investor can therefore use this information to predict the future profitability and operating capacity of the organization.

Furthermore, the finance section depicts the financing activities of the business and allows the investor to ascertain the changes made within the capital structure in a given year. For example, an investor can analyze the increase in debt or equity in a given year and therefore ascertain the changes in financial risk that a firm faces. An investor would also be able to determine the true reason for the cash in hand. For example a low cash balance might indicate low liquidity at a glance. But in reality it might be as a result of debt repayment which is a one off item and therefore the investor would easily be able to conclude that the business at present does not face a shortage of cash due to inefficient operations but simply because of repayment of debt.

An investor is thus able to analyze the various inflows and outflows of cash from the cash flow statement and also ascertain the sources of cash. Investors are able to identify the free cash flows generated from operations and therefore are able to analyze the ability of the business to pay back its debt while also meet its interest payments. The growth prospects and the ability to pay out dividends can also be predicted from FCF. The investor is able to analyze the investment policy of the company for example a firm is likely to pursue an aggressive investment strategy if there are capital outflows over a period of time. Thus, the cash flow statement is of immense importance to the investors who can use it to ascertain the various sources of cash inflow and outflow.

If you would like to learn more about what a Cash Flow Statement is, I would recommend watching this 15 minute video from YouTube. The video provides some really good tips on how an investor should view the statement.

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What is a Bond's Yield to Call?

What is a Bond's Yield to Call?

By Preston G Pysh

Any investor that is looking forward to investing in bonds must have an understanding of the term yield to call. Some bonds are callable meaning that they can be redeemed before the maturity date by the issuer at a call price that is slightly higher than the par value of the bond. Normally, bonds are called five to ten years after the date of issue and these types of bonds are regarded as call protected securities. This means they can be redeemed before the maturity date. The date at which the bonds are called for redemption is essentially known as the call date.

[caption id="attachment_1027" align="aligncenter" width="500"] What is a Bond's Yield to Call?[/caption]

Investors are interested in the returns that would be generated by the bond over the period of investment. The cash flows associated with a bond are usually the initial outflow at the market value of the bond and the later inflows in terms of interest payments and redemption value. These three primary factors determine the yield of a bond. The basic definition is the rate of return that would be earned by an investor if the investor buys a callable bond. The yield to call is the discount factor that results in the future cash inflows to generate a present value that is equal to the market value of the bond.

The yield that occurs once a bond is called is applicable only if the bond is redeemed before the date of maturity. The yield to call calculation has an inherent assumption that the investor can reinvest the interest payments at a specified rate. However, this assumption does not hold true in the real world and therefore critics argue that this calculation does not provide the true rate of return for the investors. This calculation also assumes that the bond holder will hold the bond until the call date and the issuer will call the bond at the earliest date possible. However, this may or may not be true.

The yield of a bond is likely to be lower than the yield to call calculated on the basis of redemption value, market value and coupon payments. This is because the issuer has the power to call the bond before the date of maturity and this acts as a barrier for price appreciation. The price of a called bond will not rise above the call price even when market interest rates fall below the coupon rate. This is due to the fact that the organization is likely to redeem the bonds as soon as the market conditions turn favorable. Therefore, although the yield to call calculation provides the rate of return that would be earned by an investor who invests in a callable bond, this calculation is subject to limitations due to inherent assumptions and nature of the security.

If you're interested in using a yield to call calculator, be sure to follow this link to a online calculator.

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What is a Bond Yield Curve?

 What is a Bond Yield Curve and How Do Investors Use Them?

By Preston G Pysh

The more advanced you become in stock and bond investing, the more familiar you'll become with a thing called a bond yield curve. This graph is probably one of the only tools you might find that can aide in predicting market trends. Since interest rates are ultimately controlled by the Federal Reserve (FED), tracking the way that the FED adjusts these rates can really help your investing approach.

[caption id="attachment_1025" align="aligncenter" width="500"] What is a Bond Yield Curve?[/caption]

The yield curve is broken down into two axis'. The x-axis is the term of the federal bill, note, and bond. While the y-axis is the corresponding yield for each of those securities. In order to show how all the investments are inter-related, a line is drawn between them on the graph. If you'd like to see what a yield curve looks like, simply google the term and you'll see a multitude of examples.

You see, the FED is completely reactionary. If the market goes down and jobless rates increase, they increase the supply of money so interest rates decrease. Inversely, if the market is booming and employment is very high, the FED gradually raises interest rates in order to prevent a future market bubble. This cycle, which some argue is the result of the FED itself (and I kind of agree), is something that will continue to occur in the future as long as we have a central bank for the country.

So how can you take advantage of this behavior as a stock and bond investor? Well for starters, let's talk about bonds. We know that the market value of a bond is directly related to interest rates. If we look at a current bond yield curve in 2012, you'll see a positively sloped graph that depicts the yield on long term bonds much higher than short term notes and bills. This is important because it's the FEDs way of saying, "Hey we don't think these low interest rates are going to last for a long period of time. In fact, over a 30 year period we think the average yield will be X (insert the yield from the intersection of the 30 year bond and line on the chart)" Knowing that the market value of a bond decreases when interest rates increase, we can rest assure that buying bonds in 2012 is probably a very poor financial decision.

With respect to stocks, we know when the yield curve is positively slopped, short term interest rates are low and it probably means it's a great time to be purchasing common shares.

Although this article only provides a very quick and ruff way to examine yield curves, active investors should really try to learn more about this wonderful tool.

If you would like to watch a 15 minute YouTube video on how bond yield curves work, be sure to click on this link. This takes you to a wonderful site that shows you how to access bond yield curves and applies the information to previous market conditions.

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What is a Stock Screener?

What is a Stock Screener and How Can Traders Use It to Their Advantage?

By Preston G Pysh

Making good stock selections is vital when it comes to successful investing. Traders will likely want to learn how to choose the stocks that will give them the best return on their investment. There are thousands of stocks to choose from, and choosing a good stock can prove to be quite the challenge. It is virtually impossible to sort through each and every stock and study the data of each one- or is it? A stock screener has now made this a possibility. Screeners can help traders pull up only the stocks that meet certain criteria. If you are new to investing, you will definitely want to learn more about stock screeners and how they can benefit you.

[caption id="attachment_1022" align="aligncenter" width="498"] What is a Stock Screener?[/caption]

The Basics of Screeners

Screeners are used to search for certain stocks that will meet the criteria provided by the trader. They are made up of three different parts. First, they have a database of all companies that participate in stock trading. Next, they have a set of questions for traders to answer in order to provide information about the types of stocks they want to invest in. Finally, they have a screening program that helps to sort the companies based on the criteria indicated by the trader.

Using the stock screener is a lot easier than it may sound. You will start by answering questions regarding the size of the stock, prices of the stocks, current trends, price-to-earning ratio, volatility, profit margin and debt-to-equity ratio. Once you answer these questions, a list of stocks will be provided to you that meet your specific requirements. The good news is that most of the questions that you answer will be based on a measurable factor. Quantitative analysis is very important when it comes to choosing the right stock to invest in.

Types of Screeners

Now that you know a little about how stock screeners can benefit traders, it is time to learn more about the types of screeners available. There are two basic types- customizable screeners and predefined screeners. Customizable screeners allow you to customize your screening questions to bring you the most accurate results. Predefined screeners have preset screening questions that are commonly used by many investors. These may be best for beginners.

Key Factors to Remember When Using a Screener

It is really important to remember that while stock screeners can be a really great tool for traders when it comes to choosing the right type of stock, it is not always fool proof. Stock screeners will generally only use the quantitative data about the stocks, and will not factor in any of the qualitative factors. You will always want to do a bit of research to learn more about customer satisfaction, along with any pending changes. Another thing to keep in mind is that some stock screeners are not as up-to-date as others. Choosing timely databases is vital if you really want to get the best results.

Hopefully these tips will help!

If you would like to learn more about stock screeners, be sure to click on this link because it provides a nice video that shows you how to implement the use of a Google stock screener.

Also, if you would like to learn how to invest like Warren Buffett, this link has some of the best videos on the web. You'll be sure to learn a lot.

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What is Your Investment Risk Tolerance?

What is Your Investment Risk Tolerance?

By Ann B Zuraw

W is for What is Your Investment Risk Tolerance?

[caption id="attachment_1009" align="aligncenter" width="500"] What is Your Investment Risk Tolerance?[/caption]

When planning to invest, you must first understand your attitude to risk. You must ask yourself whether you are prepared to risk a large, medium or small proportion of your money. How much risk are you willing to take? Do you have a high tolerance for risk or are you more conservative? Many financial advisors can help factor in you circumstance along with your comfort level and help you find a suitable risk level. This assessment will help you decide what type of investments you make.

The risk profiles below may help you identify what sort of investor you are:

No risk - The most important factor to you when considering savings is to preserve you capital. This means you tend to restrict your savings to cash deposits, interest bearing savings accounts and similar products that offer available access to your money and are covered under depositor's protection.

You understand the effects of inflation on your money and how this can reduce the value of your money overtime.

Low risk - You wish to achieve reasonable returns but would like to invest in a way that allows you to preserve more capital if the markets fall. You understand that it may be necessary to take some risk in order to achieve potential returns equivalent to or higher than those available from cash deposits. This could involve your capital being invested five years or more with low to medium exposure to stocks and shares along with other more riskier investments.

You are willing to accept that the value of your investment many fluctuate and you might get back less or more than you invested at the time of maturity or even earlier.

Medium risk - It is important to you that you have the potential to achieve attractive returns. You also wish to invest some not all of your capital in the more riskier investments. You accept this is necessary to achieve potential higher returns than those available from cash deposits. You understand that your capital needs to be invested for five years or more with medium to medium high exposure to stocks and shares and other riskier investments.

The opportunity to achieve attractive returns (for growth or income needs) is very important to you but you also want to invest in a way that does not expose all of your capital to more riskier investments. You have some experience in taking investment risks and accept this is necessary to achieve potential returns much higher than those available from cash deposits. You understand that this could involve your capital being invested for five years or more with medium to medium high exposure to stocks and shares and other more riskier investments.

You are willing to accept that the value of your investment may fluctuate and you might get back less or more than you invested at the time of maturity or earlier.

High risk - As an experienced investor you are prepared to take on a very high level of investment risk that may offer potential to achieve exceptional returns. This potential is a key priority for you, even in situations where it might pose a significant risk to some or all of your capital.

You understand that this could involve your capital being invested for five years or more with maximum exposure to stocks and shares and other more riskier investments.

You are willing to accept that the value of your investment may fluctuate and you might get back less or more than you invested at the time of maturity or earlier.

If you should have any questions or would like to set up an appointment to determine your Investment Risk Tolerance Profile, please feel free to contact me.

Answers from AZ

Go to http://www.WomenMoneyandDivorce.com or http://www.ChicksChatandChange.com for more information

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What is Inflation and How Does It Affect You?

What is Inflation and How Does It Affect You?

By Dan Dulin

It seems reasonable that the value of a dollar today would stay the same as the value of a dollar tomorrow, but that's not the case. Money, in a modern economy, loses its value over time in a process called "inflation." With inflation, the amount of money under your mattress stays the same, but it buys less stuff with the passage of time. Time changes money.

[caption id="attachment_1000" align="aligncenter" width="500"] What is Inflation?[/caption]

Inflation is measured by the rising cost of goods and services in an economy. Inflation makes everything you buy more expensive, so the value of your money decreases. A dollar buys four apples today but only three apples tomorrow. A dollar is still a dollar, but in terms of what you get for your money, inflation ate one apple!

Inflation is created when a government adds more money to its economy than what's needed for that economy to function properly. There are a number of ways a government can do this, but the process is generally described as "printing money." When a government adds money to its economy, it typically does so to fund its own spending. This means the government needs more money than what it has received from its citizens in the form of taxes and has decided to make up the shortage by creating new money. This deliberate act creates inflation and decreases the value of all the money in that economy.

Inflation is a hidden government tax paid in the form of rising prices. It disproportionately affects the poor, working class, and people who save but don't invest wisely. To be rich, you must minimize the effects of inflation on your lifestyle and shelter your money from it. Given that inflation decreases the value of money over time, you must put your money to work earning a return greater than your country's real inflation rate. This figure would include the price changes of food and energy.

Example: If your money is in a bank savings account paying 3% interest per year and the real national inflation rate is 4.5% per year, your money is losing 1.5% of its buying power each year (3% interest rate minus the 4.5% inflation rate equals a 1.5% loss). If, instead, you invested your money at a 4.5% interest rate, you break even and your money retains its value. Breaking even on your investments isn't a path to riches. In this example, you could only hope to grow your money if you invested it at a rate higher than the 4.5% inflation rate.

Money is made or lost with time. Your money is working for you only if it's invested at a rate of return greater than the real inflation rate reported in your country during the same period of time your money was invested. Learn what the real inflation rate is in your country and invest accordingly.

There are three kinds of lies: lies, damned lies and statistics;...

Mark Twain (1835-1910)

Excerpts from the new book Be Rich: The Ten Financial Laws of Prosperity. You can get your FREE copy of this information packed book at http://www.BeRichBook.com

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What is a Bond?

What is a Bond?

By Preston G Pysh

Bonds are used widely in the investing world, but those that are new to investing may not be very familiar with all of the commonly used terms. People commonly refer to "stocks and bonds", and it is important to understand that they are two completely different things. A bond is basically an agreement made between an investor and a company in which the investor loans money to the company based on a certain interest rate. Businesses will borrow money from their investors for a variety of different reasons. One of the main reasons to borrow money from an investor is to expand their business.

[caption id="attachment_935" align="aligncenter" width="600"] What is a Bond?[/caption]

Companies can issue a bond with a predetermined interest rate and basically sell them to potential investors. Investors buy bonds expecting to get back their original investment, along with the interest that was predetermined. All bonds will have a maturity date, which is the date that the bond will be paid out to the investor.

The interest rate that is paid to bondholders will vary from one company to the next. The interest rate is determined based on a few factors. The main factor that is considered when determining the interest rate is the stability of the company. If a business is very stable, and unlikely to default on their debts, then it will usually offer a lower percentage rate. This is because the bond is far less risky. Businesses that are not as stable will pay a higher percentage rate in order to attract investors. This makes for a much more risky bond, but can have a higher payout in the end if they follow through with their end of the deal.

If you are a new investor, it may be wise to stick with the more reliable companies even though they may offer you a lower percentage rate. At least you will be able to rest assured in knowing that you will likely see your money again, along with the interest. If you are a seasoned investor, then you might be more willing to venture out with the riskier bonds in hopes to have a higher pay out in the end. The choice is ultimately yours, but you should definitely make wise choices when it comes to investing your hard earned dollars.

Why Consider Bonds?

Most people that invest are pretty familiar with the stock market, and consider it to be one of the best ways to invest money. With that being said, why would anyone choose to invest in a bond? The return on investment of a stock is generally much higher, but there are some advantages to choosing bonds.

First of all, bonds are far less risky than the stock market. This is because bonds are almost always paid out, unless a business ends up going bankrupt first. Next, bonds can offer a steady cash flow. Most bondholders will have the option to get a monthly or quarterly payout on the interest earned from their bond. This is great for those who need some additional steady income.

Although this article is a short reference, the following website provides some great video content on what a bond is.

Also, if you already have some experience with bonds, I would highly recommend conducting more research with video lessons that teach you how to invest in bonds like Warren Buffett

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What is Benjamin Graham's "Mr Market"?

What is Benjamin Graham's "Mr Market"?

By Preston G Pysh

Benjamin Graham explored the concept of the stock market and an investor's analysis decision through the use of an imaginary investor named Mr. Market. The basic principle underlying the theory is that a rational investor would base his opinion on the fundamental value associated with the stock rather than the view of fellow investors or the signals sent by the stock market. The view is based on the principle that an investor must act rationally at all times and the decision made must be based on the intrinsic value associated with the stock rather than the market fluctuations which might sometimes send out the wrong signals.

[caption id="attachment_931" align="aligncenter" width="500"] What is Benjamin Graham's "Mr Market"?[/caption]

So what exactly is the Mr. Market parable proposed by Benjamin Graham? The story goes something like this: you must assume that you own a small number of shares in a private business that resulted in a total cost of $1000. A close associate of yours, namely Mr. Market is quite interested in your stock holdings and on a daily basis he expresses his opinion regarding the value of the shares. He is more than willing to buy the shares on some occasions and on other he is willing to sell his share to you at a quoted price. The price estimated by Mr. Market is sometimes a reflection of the true value of shares based on business developments and future prospects. Conversely, sometimes his estimates are not justified and seem a bit over exaggerated. You are not under any obligation to listen to Mr. Market and his advice. He does not mind providing advice on a regular basis irrespective of your opinion and attitude.

So what exactly should a prudent investor do in the case of Mr. Market and his price estimates? Should a person be influenced by the price quotations and buy or sell the stock based on Mr. Market's estimates? Well this is only beneficial for an investor when Mr. Market quotes a price that is very high and therefore an investor sells the stock with the aim of making a huge profit. An investor is also likely to follow Mr. Market's advice when the price quoted is very low and therefore buying shares at a low price would result in a foreseeable profit when these are sold at a higher market price. However, these two extreme scenarios are the only occasion when an investor would be compelled to buy or sell stock. In all other circumstances a person is likely base his judgments on true facts and figures derived from a company's financial position and future outlook.

The Mr. Market in reality is none other than the stock market that daily shows a change in price of shares. An investor that owns stock in a listed stock exchange is likely to be faced with the dilemma of changing prices almost on a daily basis. Either the price can be used to make a profit such as selling when price is too high and buying when price is too low, or the market price can be left alone. An investor must realize the importance of his own judgment in making investor decisions. The signals emitted by the market might sometimes be misleading and this could indeed result in a loss to the investor.

How can the market price be misleading? Well the stock price is dependent on a number of factors and amongst them the greatest one is speculation. Speculation of investors can result in an extremely high price for example if the company is likely to acquire another company, the hype in the market could create a rise in stock price. However, this price is not an indication of future prospects of the company or the ability to generate profit. An investor that sells now simply due to high price might at present face a profit but in the long term could be at a loss as the opportunity cost of selling is the long stream of dividends that follow the investment in the future.

Conversely, a person may simply sell the stock if the prices has gone down in the view the decreasing prices have a signaling effect that things within the company are getting worse. However this is reality might not be true. The price could simply be decreasing because no dividends have been declared for the given year as the company is now implementing a reinvesting policy. Thus the decrease in price might send a wrong signal to the investor who could sell the shares and lose out on dividends and capital gains in the future.

The Mr. Market analysis theme is simple and effective. The market price results in fluctuations and an investor must not solely base his decision on the price fluctuations. A prudent investor must consider other facts before buying or selling stock and this includes the current operating position of the company and the future developments. An investor must ascertain the dividend income in the future as opposed to capital gains at present and then undertake a decision.

This does not mean that the market price is irrelevant. The market fluctuations must not be ignored by an investor as they provide a signal of the value of the investment. However the true significance of market price lies in the opportunity that it provides by depicting a price too high or too low, The market price is of great importance and profitability when it depicts an extremely high price as huge capital gains could be made from sales whereas an extremely low price could result in stock purchasing so that they could be sold at a higher price in future.

Benjamin Graham's Mr. Market has received wide appreciation from investors who have now come to realize that the market price is not always justified. An investor must not ignore the market price but consider it in conjunction with several other factors such as dividend yield, future stream of dividends, current operating position of the company and future profitability.

If you'd like to learn more about Mr. Market, be sure to follow this link. The link takes you to a 10 minute video that thoroughly describes Benjamin Graham's fictional character along with more information on how to invest like Warren Buffett.

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What is the FED (United States Federal Reserve)?

What is the FED (United States Federal Reserve)?

By Preston G Pysh

The Federal Reserve most popularly known as the FED is entrusted with the task of overlooking the United States economy. It is the national bank of USA and is recognized as one of the most dominant institutions across the globe. The FED is entrusted with the task of setting the monetary and fiscal policy of the world's super power, America, which impacts not only the local citizen but the global population. The FED was created in 1913 by the United States congress. Before the formation of FED, the USA had no formal institution that was entrusted the task of setting and regulating the monetary policy. The resultant impact was that the markets were volatile and the banking system was not regarded as robust by the public at large. FED was created with the aim of formation of an institution that was solely responsible for regulating the banking system of USA. The FED is an independent organization and does not require the president to ratify its decisions. Nonetheless, the congress is entrusted with the task of overseeing the workings of the organization on a periodic basis.

[caption id="attachment_929" align="aligncenter" width="512"] What is the FED (United States Federal Reserve)?[/caption]

Boards of Governors of the FED are based in Washington and are responsible for heading the organization. The BOD is headed by seven presidential members all of whom must serve a fourteen year period. The presidential members must be approved by the senate and can be required to serve another terms based on circumstances. The board is headed by a chairman (currently Ben Bernanke) who is initially appointed by the president of USA while the senate must approve the member. The chairman is required to serve a four year period and is assisted by a vice chairman.

The BOD is responsible for overseeing the work of twelve regional branches of the FED which are situated in the chief cities of USA. The Reserve Bank is entrusted with the basic workings of the FED and operates as the major system within the workings of the central bank. The banks are responsible for generating their own revenue from various sources. These include the services that they provide to other banks, the interest income from government securities, income from any foreign reserves and interest income on debt of depository organizations. The income generated from various sources is used to finance the daily working capital cycle whereas excess income is transmitted back to the U.S treasury. Lastly, all national banks operating within USA are referred as member banks and are a division of the FED. A couple of state-chartered banks are also referred as member banks.

Federal Open Market Committee (FOMC) is a part of the FED and is responsible for deriving the policy implemented by the FED. The chair of FOMC and the BOD are the same whereas the voting members consist of presidential candidates from BOD, four Reserve Bank presidents and Federal Reserve Bank president. These members are required to serve on a rotation basis pertaining to a one year time period. Reserve Bank presidents are required to participate in the policy making process irrespective of the fact that they are granted the voting rights or not. The FOMC has the final say in a number of significant matters including the monetary policy and specifically the interest rate.

The underlying theme of FED is to ensure economic growth, employment, low levels of inflation, stability of purchasing power parity and reasonable interest rates over a long term period. Simply put, the FED is responsible for ensuring stability and sustainable economic growth. The duties of FED are therefore widespread and are concerned with ensuring the smooth running of the economy.

The FED provides a number of services to banks in a similar manner as a bank might provide a service to a citizen. This is done so that the national payment process is efficient and secure. For example, transfer of money from one bank to another might be aided by the FED. The most important duty of the FED concerns serving the government of USA. The government of USA is the higher spending customer of FED. The FED is responsible for maintaining the checking account of the US treasury whereby the inflows and outflows of cash are regulated by the FED. Any inflows that arise due to tax revenues and outflows pertaining to government spending are passed through this account and the FED is responsible for handling them. The FED is also responsible for dealing with government securities whereby selling and buying transactions pertaining to bonds and treasury bills is conducted by the FED.

The FED is also responsible for issuance of currency in form of paper and coins. Although the US treasury is responsible for the production of cash, the FED is the institution that is responsible for allocating it to financial organizations. The FED duties also extend to checking the bills for damage and ensuring that bills that show signs of wear and tear are taken out of the cash cycle.

Another duty of the FED is to regulate and supervise the other banks operating within the USA economy. The other banks include the member banks, international banks, foreign transactions of these banks and banks that are USA based but operating abroad. The FED ensures that the banking policies are in line with customer's best interest and many laws and regulations have been enacted that ensure that the banking activities are bona fide to the public. The responsibilities of the Federal Reserve Bank extend to the investors as well whereby they are responsible for setting the limits on the debt that an investor can take. 
Last but not the least the FED is responsible for setting the monetary policy of the economy. This is one of the most important duties of the FED whereby the FED ensures that the interest rates and money supply result in positive economic growth and development. The three basic tools used by the FED include the open market operations, discount rate and reserve requirements; all of which are adjusted to reflect the current monetary policy devised.

If you would like to learn more about the Federal Reserve (FED), be sure to click on this link because it provides a great video lesson on how the FED works and how investors can use it to their advantage.

Also, if you would like to read a great resource on investing, be sure to check out this Warren Buffett book. It discusses subjects like interest rates and how the FED controls them.

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What is a Capital Expenditure?

What is a Capital Expenditure and How Can It Be Used for Investing?

By Preston G Pysh

Capital Expenditure is basically defined as the funds that are used by a business in order to make upgrades to their physical assets. This may include their actual real estate property, building or office equipment. Generally, these expenditures are made in an effort to improve or expand business operations. It is also referred to as CAPEX. Sometimes, Capital Expenditures can be as small as making a small building repair, and they can be as large as building a whole new office building or factory.

[caption id="attachment_926" align="aligncenter" width="500"] What is a Capital Expenditure?[/caption]

The capital expenditure of a business will vary greatly from one business to the next. The companies that have the largest amount of capital expenditure include the oil industry, telecommunications industry and the utility industry.

When a business is handling their accounting, expenses should be classified as capital expenditures if they involve newly acquired capital assets or investments that improve current capital assets. Expenditures are always capitalized, which means that the company will spread the overall cost of it across the life of the asset.

Some shareholders prefer businesses to use their money for projects that will show an immediate return on investment, while others are more focused on the long term growth and development of the business. Since shareholders can have such a different outlook on their investments, it is sometimes quite difficult to please them all.

The best way to ensure that shareholders are satisfied is for a business to maximize the value of their shareholders. To do this, a business should undertake projects that allow them to have a positive net present value. The net present value, or NPV, is the present value of cash flow that is to be expected once the project is complete.

The good news is that the business itself is not the one that is responsible for deciding whether or not to pursue short term or long term goals. The firm can select projects that will help to maximize its NPV, and then the shareholders are able to borrow and lend accordingly. This ensures that shareholder values are maximized to their potential, and also helps to make sure that the shareholders are satisfied with their investments in the company.

Capital expenditures for a business can be found in several different places. The balance sheet that provides the company's assets, equities and liabilities will have the capital expenditures listed in the PPE section. This is also known as the "Property, Plant and Equipment" section. On the income statement, which is essentially a statement that shows profits and losses, the capital expenditures can also be found. You will also see them on the company's cash flow statement and equity statement.

Whether you are a business owner or an investor, it is important that you understand expenditures and how they work. It is a critical part of business accounting and it is also very important for shareholders of a particular business. To ensure that you are making informed business and investing decisions, always stay on top of the capital expenditures.

If you would like to learn more about capital expenditures, be sure to click on this link because it provides a great video lesson on how Warren Buffett uses this expenditure to determine the owner's earnings of a business. The owner's earnings is probably one of the most important calculations an investor can make. The site that displays this video specializes in teaching students how to invest like Warren Buffett.

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What is an Income Statement?

What is an Income Statement and How Can Stock Investors Use It to Their Advantage?

By Preston G Pysh

There are three main financial statements that are important for investors to be familiar with. These include the balance sheet, cash flow statement and the income statement. The income statement is basically the statement that measures the financial performance of the company. It is assessed by taking factors including the revenue and expense into consideration. It will also give a measure of the profit and loss that was incurred by the company. They are usually created quarterly or annually. Some businesses refer to the statement as a profit and loss statement.

[caption id="attachment_922" align="aligncenter" width="500"] What is an Income Statement?[/caption]

An income statement has two main parts. These are known as the operating section and the non-operating section. Investors can usually get more from the operating section. This gives them information about the revenue and expenses that come from the regular business operation. The non-operating section will include information about the revenue and expenses that come from activities that are not directly related to the regular business operation.

Income statements can either be single-step or multi-step. A single-step statement basically shows the sales minus the cost of the materials and production. This results in the gross income. These are generally very easy to read and understand. Multi-step statements are a bit more involved. Multi-step income statements will include the following information:

Net Sales - the income a business brings in as a direct result of selling goods and services.

Cost of Sales - the expenses incurred for the materials used to create goods to be sold.

Gross Profit - the profit margin after that is calculated after all business expenses are covered.

SG&A (Selling, General & Administrative Expenses) - the expenses for operating the business.

Operating Income - the difference between the company's gross profit and the SG&A amount.

Interest Expense - the cost of interest paid out to investors of the company.

Pretax Income - the amount of income generated before any taxes are paid.

Income Taxes - the amount of tax that is paid by the company.

Net Income - the amount of money a business profits after everything is paid, also known as the bottom line.

These are all aspects of an income statement. When you take a look at an income statement for a business, you can determine the company's profitability. This is something that should be considered when you are determining whether or not you want to invest in a business. Choosing a business that is not very profitable to invest in is not a very wise investment move. You should not only look at the most recent statements, but you should also take a look at the previous income statements. This will allow you to see the trends for the business you are considering.

Investors that have a full understanding of an income statement can really have a big advantage in the investment world. Most wise investors take the time to analyze the components of the statements before they decide to invest. Businesses that have a good profit margin are generally wise investment options because they manage their business well.

If you would like to learn more about income statements, follow this link because it takes you to a video on how a small business is valued with an abbreviated income statement.

Also, if you're interested in learning more about using financial statements for investing, I highly recommend this Warren Buffett Book. The link takes you to Amazon where the book can be found. This book is a great read and it teaches the reader how to invest like Warren Buffett using financial statements.

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What is an Austerity Package?

What is an Austerity Package?

By Mark W. Medley

To a majority of Europeans and in the future Japanese, a new buzzword has dominated the national news- austerity. Austerity measures are now a vital fact of life as many governments start tackling their national debts. What is an austerity package?

[caption id="attachment_912" align="aligncenter" width="500"] What is an Austerity Package?[/caption]

In economic terms, when any kind if government, whether it is a local, regional or national has to reduce its spending and perhaps raise its fees and taxes to pay back creditors. This is an austerity package.

Depending on the nature of the economy, and amount of debts the government has accumulated, each austerity package differs. However, the effects of cuts, does trickle down to the economy, and creates adverse effects.

Sharp austerity measures made by the current Greek government have led to violence on the streets, and bitterness within Greek society. In Ireland and Spain it has led to some demonstrations, but a silent acknowledgment that these measures had to be implemented.

The Five basic Ingredients of an Austerity Package can be:

1. Pay Cuts

Generally the civil service is first to be hit with an austerity package. Usually salaries are either cut or frozen, whilst departments cut or merged. In some cases staff are laid-off, or their working hours reduced. Recently in Greece, public servants and politicians has to accept a 10-15% cut in salaries. The new UK government has also cut pay to ministers by 5%, and stopped most civil servant bonuses.

2. Reduced Subsidies

Some countries subsidize transport, petrol costs and even new business start-ups. In the European Union most new business start-ups are subsidized, as well as some public transport, and sectors involved in agriculture. If these are cut or a subsidy is phased out, the effect could range from higher priced food to less new businesses.

3. Increased Taxes

In times of austerity, some taxes will have to naturally rise, whether it's a 'wealth tax" or an increased luxury goods tax. Some taxes are placed on alcohol sales or cigarettes, which often raise in price during times of austerity, even local rates on your home or business could rise.

4. Social Security

California recently announced it would evaluate its existing social security system, in order to save billions the state owes due to its massive deficit. Greece, the UK and Spain also are currently re-evaluating their current welfare systems.

In 2005, Germany cut its once generous social security system, creating a "means tested" work fare system- based in part on a community work model. The age of eligibility for a state pension has increased in many countries, whilst student and poverty- based programs are often cut.

5. The Sale of State Assets

Germany's example of sharp austerity measures in the mid-2000s, led to the sale of state buildings, and new rent-lease agreements with the new owners. This led to a reduction in state ownership, whilst releasing immediate funds to the government. Schools sometimes were sold, whilst services privatized or simply shelved.

6. Lay-offs

State Governments often trim or even close down departments to save money. In many of California's schools, teachers have been replaced by television sets, and schools once opened only four days a week. Theatres may close, whilst public transport is cut. State lay-offs add to unemployment queues,- which is one reason many economists argue that in a deep recession, the state should employ more people rather than cut jobs.

The effects of any austerity budget, depends on how far people are ready to accept it. In many societies- cutting state funded social safety nets are unpopular, and could have a destabilizing effect on society.

Much depends on how the government stimulates the economy, whilst implementing austerity measures, in the hope that a new economy will offset the consequences of any cut backs- either way 2010 is the year of austerity for many.

Discover how to survive and thrive in a changing economy

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What is a Double Dipped Recession?

What is a Double Dipped Recession?

By Mark W. Medley

There are rumors and bigger rumors, but 2010 for many people involved in economics has been the year more experts are openly discussing the possibility of a double-dip recession. What is a double dip recession?

[caption id="attachment_907" align="aligncenter" width="500"] What is a Double Dipped Recession?[/caption]

Economists tend to call recessions by their shapes. There are V, W, L and U shaped recessions- a double-dip recession is a W shape. Those who are familiar with reading charts may understand its significance, but to the layman still puzzled by the terminology.

A double-dipped recession is:

An economy falls into recession, emerges from it for a short period of time then falls back into a recession again, forming a W shape on a chart- rather like a store that has less customers, then some return but a few months later, until the store starts seeing less customers again.

Double- dipped recessions are different as most economic recoveries traditionally are V-shaped- when economic growth falls, but then recovers sharply after a brief period of stagnation.

According to official statistics most countries are starting to recover, and are forming a V-shaped recession.

Past examples of a double-dipped recession

One example of a double-dipped recession was in the early 1980's in the United States. For a period of three months from April to June 1980, the economy shrank by an estimated 8% of GDP. Then it leveled out between January to March 1981, and later grow by an estimated 8.4%.

The Federal Reserve feared renewed inflation, raised interest rates, leading to a dip back into recession, then the economy grew again- partly because of supply-side economics but also increasing Government borrowing adding to the nation's deficit.

2010- A different type of W-shaped recession

However the early 1980's is different to most economies today. There was no mass banking crisis or mortgage crisis as in 2008, nor has the economy of the World been as global.

The double-dip recession many speak of today, could be much deeper than in the 1980's, and there are several significant reasons:

• Traditionally during a recession governments stimulate the economy, then after a period, the private sector take over. This has still not happened in many countries, where economic growth is still largely stimulated by government investment.


• The scale of government debt in 2010 is much higher than in 1980. In fact some experts state that the US alone owes over 93% of its GDP or a staggering 13 trillion dollars.


• Many businesses in the private sector are still struggling, some larger Corporations are heavily indebted after government bailouts. These businesses have to expand and invest in order to offset any drop in governmental assistance to the economy.

If the United States and some other countries like Japan, the UK and most nations in Southern Europe fall back into recession. Their Governments cannot borrow to stimulate their economies again. Private investors and companies have to fuel a recovery, rather than a Government.

This could mean a W-shaped recession could be much deeper than in the early nineteen eighties, and would have to be stimulated by the private sector. One reason most economists are looking at the growth and investment in the economy by this sector.

If the growth in private business and investment is less than, the investment needed to pull out of a stagnating economy. We could see the start of a double-dip or W-shaped recession. A recession some say could be deeper, and more prolonged than in many previous economic downturns.

Discover how to Adjust to Change and develop your own future.

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What is a Budget Deficit?

What is a Budget Deficit?

By Mark W. Medley

2010 is the year of the budget deficit, in Europe, the USA and other recession hit Countries around the World. But what actually is a budget deficit?

[caption id="attachment_903" align="aligncenter" width="500"] What is a Budget Deficit?[/caption]

When we spend more than we earn, we create a debt. Sometimes this debt can be small, as it actually is based on our assets- a house, land, or future earnings. Other times it can actually surpass the value of our assets, and force us into liquidation or voluntary bankruptcy.

This works the same way with Countries. For instance when a nation spends more than it earns, it creates a deficit. This deficit is actually debt, which often is financed through loans from International Banks or by issuing bonds. In worse case scenarios the IMF will jump in and loan to countries with high deficits.

In some cases Countries may have a high deficit but have assets that can be used to borrow on in order to develop. This is often the easiest way to pay for development, especially in resource-rich nations. Economists usually see this as a convenient way to finance development.

Nations with high deficits are comparable to individuals with high debts. They lack funds, because more of what they earn is used to pay off these debts. So they have to cut back, re-mortgage state assets or even sell off their natural resources. So comparable to individuals who have high debts- the spare television might be sold on eBay and living expenses are cutback.

Often we see charts showing a national deficit as a percentage. This percentage is calculated on the GDP (Gross National Product) of a Country, which is perceived to be based on what the nation produces. This sounds quite straightforward, but sometimes the actual GDP is based on the "market value" of what's produced in a country- which could be as diverse as the food it produces, to the gross value of civil law suit settlements.

If the perceived percentage is positive, then the Country in question is still producing more than it owes. But if the percentage is negative, it is currently producing less than it owes. In 2010 Ireland, the UK, Romania, Greece and Malta have the highest deficits in Europe. In the Americas, the USA has the highest deficit, whilst in Asia, Japan.

In most countries with a high deficit, the economy usually changes, as a Government at some point will need to face how to deal with this deficit. This is one reason 2010 can be called the "Year of the Deficit," as so many Countries face the prospect of rising debts in an ongoing recession.

Confused, fearful or simply looking for a better future? Learn how to survive and thrive in an economic crisis. build a future for you and your family

Do you like what Mark writes? He can write an article for you email Mark

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What is Biflation?

What is Biflation?

By Mark W. Medley

Many senior economists are starting to agree that the current economic conditions some countries face, differ to the traditional boom to bust to boom cycles- we had in the past. Biflation is the new buzzword for many of our 21st century economies. What does biflation mean?

[caption id="attachment_900" align="aligncenter" width="500"] What is Biflation?[/caption]

Biflation simply means the value of the things we own and produce are devalued, whilst the cost of the things we need are continuing to rise. Add in the mixture of rising energy prices in energy poor countries, and depleted confidence in nuclear energy. Then many countries could be in a biflation cycle.

In many parts of the world, housing has declined in value, whilst owing to a dependency on imported energy-the cost of food, and buying this energy has risen. There are also other factors that can create biflation.

Quantative easing (printing money) devalues a currency, and it also compounds a nations debt. Nations that are dependent on importing food and/or oil pay more, whilst the value of their currency naturally declines with these rising debts.

A higher debt creates the need for any government to raise funds to pay off their creditors. This usually is passed onto the taxpayer, in the form of increased taxation and reduced services. Once this cycle kicks in, unless salaries rise with these costs. People have less to spend on consumer goods, and the local economy could see a fall in the cost of housing.

In the much of the world, the majority of people working are seeing a decline in real salaries, as basic costs like electricity, fuel and food continue to rise. Cutting into the spending and borrowing power of many consumers who fueled the pre- crisis 2008 bubble economy.

This natural cycle of biflation (mixflation) creates a climate of reduced earnings, higher basic living costs and low wage employment growth. In a sense, many experts claim Greece, Ireland, Portugal and the United States of 2011-2012 mirrors this modal.

Many of these same economists, cite energy costs determining the immediate future of any nation in a biflation cycle. Rising energy prices naturally create rising power, and transport costs, leading to higher food costs. chocolate, soya beans and wheat prices already are at their highest since before the 2008 crisis began.

If this momentum continues to develop through this decade, the nations that export these valuable resources grow wealthier, whilst countries dependent on importing such resources like coal, oil, and even food continue to grow poorer.

Biflation, is a dangerous cycle which could be termed the "long road down" if it remains unbroken. Yet, solutions have to be found to stem this vicious trend, or biflation could become the buzzword of this decade.

Discover how you can survive and thrive during a period of economic change

Article Source: http://EzineArticles.com/?expert=Mark_W._Medley
http://EzineArticles.com/?What-is-Biflation?&id=6081797

What is a Reverse Auction?

What is a Reverse Auction And How is It Different from a Traditional Auction?

Author:Jim Anderson

There's a new fad that's changing how companies everywhere buy products and services from their vendors. It's called a 'Reverse Auction'.

[caption id="attachment_862" align="aligncenter" width="395"] What is a Reverse Auction?[/caption]

In a traditional auction, you know like the ones that you've seen on TV, somebody with something to sell stands in the front of the room and everyone who wants to buy the thing yells out a price that they are willing to pay. The price keeps going up until someone agrees to pay a price that nobody else in the room is willing to top.

A reverse auction works in a similar fashion, but it's just a little bit different. In a reverse auction, the company that you'd like to sell your product or service to stands in the front of the (virtual) room and you and all of your competitors get to yell out how much you'd charge them for what they are willing to buy. The company that is willing to go to the lowest price wins -- most of the time.

Reverse auctions are often conducted online. The company that is trying to purchase the product or service can purchase specialized software that allows them to run the reverse auction. On a given date, at a given time, each of the vendors who want to participate in the reverse auction will be instructed to log on to a web site. Once on the web site, the auction will start. The vendors will enter the price that they are willing to sell their product to the buyer for. They may also enter other parameters including delivery date, quantity, etc.

The software will evaluate each of the entered bids and each bid will be ranked against all of the other bids. Each of the vendors will be able to see where they stand in relation to all of the other bids that have been submitted. As each of the parameters that are part of a bid is changed, a vendor will see their ranking change relative to the other bidders. This process will continue until the price drops so low that no other vendor is willing to submit a bit with a lower price. At this point in time, the company that is running the reverse auction will declare that the auction is over and the company that submitted the lowest bid will have won.

Are you going to be ready when your best and biggest customer comes to you and tells you that that deal that you thought that you had locked up is now going to be awarded based on a reverse auction?

Article Source: http://www.articlesbase.com/negotiation-articles/what-is-a-reverse-auction-and-how-is-it-different-from-a-traditional-auction-6174106.html

About the Author

Click here to learn more about reverse auctions:
http://www.blueelephantconsulting.com/store/receipt/secrets-to-winning-reverse-auctions

I am pleased to present my latest negotiation training video:
'Reverse Auctions: Secrets To Winning'.  This new video contains
all of the information that a company or individual needs in order
to prepare for, participate in, and (hopefully) win the next
reverse auction that you are a part of.

Click here to learn more about reverse auctions:
http://www.blueelephantconsulting.com/store/receipt/secrets-to-winning-reverse-auctions