Tech companies got a bad rap during the dot-com bubble for promising the moon before they even has a penny in earnings. Internet darlings that actually lost money on most of their sales still saw their stock prices shoot up. But today it’s easier to understand a tech company’s earnings reports and balance sheets than those from companies in other sectors. Some five years ago, new accounting rules paves the way for cleaning up the stock options fiasco. Since then, earnings reports have become more transparent, with less room for accounting shenanigans. Unlike banks, which have a zillion ways to hide bad loans, or commodity-based companies, which use complex models to estimate the value of their reserves, technology companies’ earnings are largely made up of simple, pure cash flow.
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Why Bank Accounts For People With Bad Credit Are Difficult To Find The banking industry is based on trust and a credit rating system. Customers need to trust the banks and bankers, in turn, will prefer not to open accounts for people with bad a credit history. No individual is born with...
Some Tech Bubble Stocks Finally Breaking Even after a 10 Year Wait This week, Amazon.com released a great earnings report that propelled the most well known "internet stock" to a new all time high. As a person who experienced the internet stock bubble firsthand, Amazon's stock popping 25 points in a single...
Seemingly Harmless Activities May Harm your Credit Your credit score is a vital number that determines how businesses and financial institutions treat you. Everything we do financially has an effect on our score, for good or bad. What surprises many people is how seemingly minor or harmless...
Easy-money policies are used to stimulate bank lending and spending by consumers and businesses at times when the economy is in a recession and unemployment is unusually high. If the easy-money policies cause aggregate demand to increase, real output will rise more rapidly and unemployment will decline.
These beneficial effects of easy money are, however, not automatic. If the economy is in quite severe recession and expectations regarding the future are gloomy, consumers and businesses may be reluctant to borrow and spend money. Also, the banks may choose to hold some excess reserves rather than make loans that might prove risky due to poor economic conditions. Thus, easy money merely increases the banks’ reserves and makes more loans possible; it does not automatically create money and boost aggregate demand. This problem has been likened to “pushing on a rope,” which suggests that easy money by itself may not always be sufficient to lift the economy out of a recession. For this reason, many people believe that easy money should be combined with federal budget deficit, which can provide a more direct boost to aggregate demand and can thereby start the economy on its way toward recovery.
When easy money does generate higher aggregate demand, the results are not totally beneficial: a side effect of the increased total spending may be more rapid inflation. While the reduced unemployment from the easy money policies may make some additional inflation acceptable, this side effect does place a limit on the use of easy money.
Terms From Wall Street That Make Me Laugh Well, I'm in a bit of a humorous mood today, so we're going to do something a little different. There are any number of weird and wacky words and phrases that are used by investors to help describe the investment...
Inflation and Consumer Debt: Truth and Myth Personal finance writers frequently comment on how inflation will affect the average consumer. This topic has received a lot of attention in recent months (including here on Tough Money Love) as our government pours money into the economy. Our central...
How To Reduce A Trillion Dollar Deficit Stanford professor John Taylor had an alarming op-ed piece in the Financial Times on the Trillion Dollar deficits "I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial...
How Much Does Your Money Matter to You? If you were to ask anyone on the street that question, odds are the majority would answer, “very much.” However, these same people will easily turn around and drop a small fortune on something without a second thought as to...
During a period of “easy money,” when the banks have plentiful reserves and are ready to make numerous new loans, interest rates tend to fall, to encourage borrowers to borrow additional funds. Thus, “easy money” tends to involve two characteristics – increased availability of loans and lower interest rates – both of which tend to stimulate borrowing and spending by consumers and businesses.
During a period of “tight money,” the scarcity of loans causes interest rates to rise, so that the available loans tend to go better credit risks and the highest bidders among them. These two characteristics of “tight money” – reduced availability of loans and higher interest rates – both tend to depress borrowing and spending by consumers and businesses.
Thus, monetary policy can influence the money supply through either the supply of loans or the demand for them. By increasing or reducing the banks’ reserves, the Bank of Canada can influence the availability (or supply) of loans, and by altering interest rates, the Bank of Canada operates in both ways, influencing both the availability and the cost of credit.
Expand Your Business With Business Loans In the language of business, the business is a process of making money. Planned investments and appropriate decision in the business helps to grow. Business is always incomplete without adequate funds. Money is the means by which a company grows....
Tips for Paying Off Student Loans Right now, the student loan industry is going through one of its worst periods in decades. New Federal regulations have forced many banks to stop offering student loans, and students are being forced to either find a direct loan or...
Same Day Cash Loan Facts and Benefits of a Same Day Cash Loan There will be a time in your life where you face a life threatening emergency and you need the money as soon as possible. It could be anything from an unexpected...
The Many Flavors of Loans Money can be lent to those in need, at a reasonable rate, from a pool of money that comes from investors and savers. When the lending institution provides money for consumers to borrow, either secured or unsecured, the practice is...
As we have seen, the 8 to 10 – percent annual inflation rates of the period since the early 1970′s have been dramatically higher than the inflation rates of 2 to 5 – percent characteristic of the 1950′s and 1960′s. Such rapid inflation rates have caused great concern among the public, as well as considerable confusion as to their causes. Generally, it is reasonable to say, that the real causes of this severe inflation were quite different from what the public believed to be its causes.
While the period since the early 1970′s has seen exceptional (and well-publicized) increases in oil, energy and food prices, as well as huge income gains by many groups, these were not the basic causes of the severe inflation, but rather contributing factors to it. In the view of most economists, the basic causes of the rapid inflation of the 1970′s lay in exceptional increases in aggregate demand, which simply outran the economy’s capacity to produce, thus generating the worst inflation in many years. Underlying these however, because the economy and the appropriate money supply generally grow from year to year, it is not often appropriate for the Bank of Canada to actually reduce the money supply, except for quite short periods. The question, rather, is generally how rapidly the money supply should be allowed to increase. When the Bank of Canada is seeking to slow down the rate of growth of the money supply by restraining the lending activities of the banks, these policies are also generally described as “tight money policies.”
Thus, the primary tool of monetary policy is the open-market operations of the Bank of Canada, in which purchases and sales of bonds by the Bank of Canada increase and decrease the banks’ cash reserves, and thus the money supply. The Bank of Canada, however, does have other methods of influencing the volume of lending by the banks and thus the money supply, some of which are discussed in the following sections.
Chinese Paper Money Coins and Paper Money -> Paper Money - World -> China The Chinese actually invented paper money, and the process of making it dates back to the early 9th century. Collectors are always seeking Chinese paper money due to its...
Finovate Demos - Part 1 Here are some updates from the first batch of demos at Finovate. Authentium - Safe Central makes keystroke loggers or screenshot grabbers “blind.†Runs on top of Firefox. Prevents man in the middle and phishing. Credit Karma - Free credit...
Will Hyperinflation Hit Canada? Some readers have been asking about the prospect that a US-led hyperinflation would extend into Canada. The short answer is that it depends on how much of an economic bully the US administration is going to be to its trading...
In addition to their cash reserves, the banks may be required to keep “secondary reserves” of 0-12 percent of their deposits. These secondary reserves are mostly very short-term government promissory notes called “Treasury Bill,” which can be converted into cash very quickly. Since December 1, 1981 the banks have been required to keep secondary reserves of 4 percent of all deposits.
The control of the money supply
As discussed earlier, it is important that some control be placed on the creation of money by the banking system, so that the money supply grows neither too rapidly nor too slowly for the needs of the company. The agency responsible for controlling Canada’s money supply – the central bank – is the Bank of Canada. An agency of the federal government, it performs a considerable variety of functions, some of which are mentioned already. In this chapter, we will focus on the most important function of the Bank of Canada: its control of the money supply of the nation through its monetary policy.
Who Will Stimulate the other Economies? As bad as things are in the U.S., other countries have it worse. Some anecdotal evidence from around world: Today, the Bank of England lowered its benchmark interest rate to 1%, the lowest its been since the bank was founded...
Activate Your Bank of America 3% Cash Back on Gas Consumerism Commentary posted last week about Bank of America's 3-2-1 cash back promotion for their credit cards. Here's how it works: One their cash back cards, you get 3% cash back on gas, 2% cashback on groceries, and 1% cashback...
What's Happening With the Canadian Dollar? The Canadian dollar has broke through some interesting points this past week. On Tuesday, it hit 14-month highs, climbing up 3.5% over the past 7 days - which is quite a bit in currency terms. The loonie is also up...
What is a Bank CD? Before comparing interest rates or buying a CD at the bank, come to an understanding on how Certificates of Deposit work. Rules and Regulations of Bank CDs CDs, commonly known to many as bank certificates of deposit, are issued by...
Banks are private firms that start with invested capital and seek to “make money” in the same sense as do firms making neckties or bicycles. Banks do not set out to “make money” in the literal sense, but, nonetheless, they do so as an incidental by-product of their attempt to make profits for their owners.
Market Trading Success Why is it that some people are successful in trading the markets? And why is it some people fail? Is it luck that determines if you are successful or not in making money from the market? Is it the system...
Perhaps the Most Powerful Force in Marketing We all know that the most powerful force in marketing is word-of-mouth. But why is that? Well first, word-of-mouth marketing is free. Second, word-of-mouth marketing when it's done properly is highly infectious and can spread rapidly. So ask yourself this......
Money Merge Account Analysis Pt 17 Today, I'd like to focus on one thing. The disclaimer that appears on most MMA agents' web sites: "United First Financial, its agents and subsidiaries provide Internet web based software and support services. United First Financial does not provide accounting,...
Time for a Heloc! Ouch! Just tallied last months expenses. Apart from the rent,food, $600 for new tires/brakdes and $900 insurance premium, I had quite a lot of expenses.$6k landscaping$16k unexpected request for a downpayment on a house [1031 shortfall that the loan officer...
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