Learn Gold Coins » Economics and Predictions

What Is The Federal Reserve?

Robert Blossom — Wed, 26 Oct 2011 21:01:28 +0000

The central bank of the U.S. is called the Federal Reserve, or Fed. It provides our country with a secure, stable, and flexible financial and monetary system. The Fed is headed by a Board of Governors comprised of seven members nominated by the President of the United States. The U.S. Senate confirms this nomination and board members serve 14-year terms.

As a central bank, the Fed acts as a bank for other banks and for the federal government.

The Federal Reserve System is made up of 12 Federal Reserve Banks and several branches. The Reserve Banks serve as operating arms of the central Fed bank. The Federal Reserve System was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act.

Since its creation, the role of the Federal Reserve has changed and expanded. One of its main responsibilities involves conducting the monetary policy of the U.S. to help keep prices stable, keep interest rates low, and maintain employment. The Fed also supervises and regulates banks to ensure that consumer credit rights are protected and that people can keep their money there safely.

The Fed is a financial services provider for the U.S. government, depository institutions, and foreign central banks. It distributes paper money and coins to U.S. banking institutions, processes electronic payments, and clears checks. Not everything the Fed does is transactional, as it also conducts research regarding the U.S. economy and distributes relevant information in paper, verbal, and electronic forms.

Interest rates and inflation are affected by the Federal Reserve System through the monetary policy. People who buy gold coins often keep their eye on inflation. When they see a drastic drop in the purchasing power of their dollars, they often invest in gold coins, bullion, and other forms of the precious metal to protect their assets.

What Is The WTO?

Robert Blossom — Wed, 05 Oct 2011 20:51:25 +0000

The WTO, or World Trade Organization, is the only international, global organization that deals with trade rules between nations. WTO agreements, which have been negotiated, signed, and ratified by most of the trading nations in the world, form the foundation of the organization. The primary goal of the WTO is to help exporters, importers, and producers of products and services to conduct business.

Located in Geneva, Switzerland, and established in January 1995, the WTO currently has 153 member countries. For 2011, it has a budget of 196 million Swiss francs. Pascal Lamy currently serves as the Director-General of the WTO, heading the organization for a second term through August 2013. Mr. Lamy is a businessperson, French political advisor, and the former European Commissioner for Trade. He also serves as the Honorary President for Notre Europe, a Paris think tank.

Functions of the WTO include administering its trade agreements and serving as a forum for trade negotiations. The organization also monitors national trade policies and handles disputes regarding trade. Developing countries turn to the WTO for technical support and training when they enter the international trade arena. WTO cooperation with other international organizations contributes to mutual goal attainment.

WTO negotiations have open markets by helping countries lower trade barriers. They have also helped maintain these barriers to prevent spreading of disease or to protect consumers. WTO agreements feature the legal ground rules regarding international commerce. They enable producers, importers, and exporters to conduct business without jeopardizing the environmental and social objectives of governments.

When WTO member governments experience trade issues, they turn to their organization to resolve these through negotiation. By helping trade to flow as freely as possible without undesired ramifications, economic health and development are encouraged. People, businesses, and governments become aware of international trade rules and feel confident that these will not suddenly change.

Where To Get Statistics About The Economy

Robert Blossom — Wed, 28 Sep 2011 20:48:18 +0000

Whether you are looking for investment purposes or just as a concerned citizen, there are many places to find economic statistics. Every American should know where the economy stands at any time because it can impact our purchasing and selling decisions. Since economic events outside U.S. boundaries regularly impact domestic decisions, it is important to be aware of data regarding those as well.

The U.S. Bureau of Economic Analysis (BEA) publishes national economic statistics on its Web site. These include gross domestic product (GDP), consumer spending, corporate profits, personal income and outlays, research and development, and fixed assets. Regional, industry, and international statistics are also available. Resources like interactive data, a customer guide, and current business papers are just a few clicks away.

The Economics and Statistics Administration releases 12 quarterly and monthly Principal Federal Economic Indicators. These are collected by the BEA and the U.S. Census Bureau. Many businesses rely on these indicators in their daily decision-making. Public comments made by the ESA Under Secretary and Chief Economist as well as the Secretary frame the indicators in a global and national economic context.

The U.S. Bureau of Labor Statistics publishes monthly data regarding the unemployment rate, change in payroll employment, average hourly earnings, and consumer, producer, and U.S. import price indexes. On a quarterly basis, statistics regarding productivity and the employment cost index are published. Visitors can also browse employment-related economic statistics by census region and state.

The Federal Reserve publishes economic data, referred to as FRED, on its Web site. Data categories include regional, international, and U.S. financial data and exchange rates. The latest releases, popular online publication series, and at-a-glance information are also provided. Whether they are planning to buy gold coins or engage in forex trading, individuals can find useful economic statistics on these Web sites.

Where To Find Current Inflation Rate

Robert Blossom — Wed, 14 Sep 2011 20:42:14 +0000

It is safe to assume that rising prices are part of our society. It is a rare occasion when we see something actually decrease in price. The general trend of increasing prices for goods and services is called inflation and it affects every one of us. It is not difficult to find general details about inflation and learn the current inflation rate- all we need is a computer with an Internet connection.

The best way to find most information is to go right to the source. The Bureau of Labor Statistics, part of the U.S. Department of Labor, publishes the Consumer Price Index (CPI) monthly. This reflects the change in prices that urban consumers pay for a representative basket of goods and services. The next release of CPI data is scheduled for July 15, 2011.

During a visit to the BLS Web site, consumers can use an inflation calculator to learn how the buying power of their dollars have changed over the years. They can also view CPI history tables, access CPI databases, and find regional CPI figures. Even details as specific as the relative importance of CPI components are provided on this site.

InflationData is a great source for inflation figures that are more precise than even the government provides. Inflation rates are provided to two decimal places and a table reflecting rates for the past 11 years is available at a glance. Rare deflation rates are listed in red so consumers can easily distinguish them from the general rise in prices.

A news feed provides summaries of relevant articles, with the full contents accessible via a mouse click. One of the most recent articles is important to those who buy gold coins. It explains how the gold/silver ratio currently reflects a general movement of investors away from risk, something that is no surprise to precious metals investors.

What Is A Treasury Bill?

Robert Blossom — Wed, 07 Sep 2011 20:41:49 +0000

Treasury Bills, also called T-bills, are short-term U.S. government-backed debt obligations. T-bills are offered in $100 denominations to a maximum $5 million purchase and mature in under one year. A competitive bidding process is used to issue them at a discount from their par (face) value. Instead of having fixed interest payments as conventional bonds due, the bond appreciation serves as the return.

Maturity terms for T-bills are four, thirteen, 26, and 52 weeks. As an example, an individual might purchase a 13-week T-bill for $9,900. The government might issue an IOU that it will repay the person $10,000 in three months. Unlike a coupon bond, the holder does not receive regular payments. Instead, the bond appreciation is the difference between what the person paid and what is received at the end of the 13-week period, in this case $100.

It is possible for a T-bill auction to result in a price that equals par. When this happens, the U.S. Treasury issues and redeems the securities at par value. T-bills can be purchased online from TreasuryDirect, a Web site maintained by the U.S. Treasury. T-bills may also be purchased through brokers and banks. Individuals, estates, trusts, partnerships, corporations, and various other entities may open T-bill accounts.

T-bills are useful for diversifying investment portfolios with a product that is secure and has a short-term nature. They may be held until they mature or sold before that time, with no minimum term of ownership required. Investors will find them auctioned on a regular schedule, with the discount rate determined at each auction.

In recent auctions, four-week T-bills sold at a zero percent discount rate, 13-week bills had a 0.015 percent discount, 26-week bills had a 0.045 percent discount rate, and the discount rate for 52-week bills was 0.100. Interest income on T-bills is subject to federal income tax but is exempt from local and state income taxes.

What Is Supply And Demand?

Robert Blossom — Wed, 03 Aug 2011 01:24:38 +0000

Some people say money makes the world go ‘round. Were it not for supply and demand, there would be no reason to infuse money into an economy. These two factors form an economic model for determining price within a market. There are several basic laws of supply and demand and the result of each is an economic equilibrium of quantity and price.

The conclusion of supply and demand models within a competitive market is that the unit price for an item varies until it reaches a point where the quantity that consumers demand equals the quantity supplied by producers. This is the state of economic equilibrium. The standard graphical depiction of the model reflects a vertical axis of price and horizontal axis of quantity.

The first basic law of supply and demand is that increasing demand coupled with unchanged supply leads to a higher equilibrium quantity and price. If demand decreases and supply stays unchanged, equilibrium quantity and price will be lower, according to the second law. Income, preferences, number of buyers and their future price expectations, and prices of related items determine demand.

The third and fourth laws assume unchanging demand. If supply increases, equilibrium price will be lower but quantity will be higher. A decrease in supply results in lower quantity and higher price. Production costs and technology, number of suppliers, prices of related goods, and expectation regarding future prices determine supply.

Comparative static analysis looks at how equilibrium is affected by changes in external factors affecting the market. Specialty markets like those featuring consumers who sell and buy gold coins can use the model. Supply and demand models are also applied to wages within the labor market. Individuals serve as suppliers, selling their labor to the highest bidder. Businesses are the demanders of labor, trying to get the lowest price. The wage rate is the equilibrium price for a specific type of labor.

Where To Learn About Economics

Robert Blossom — Wed, 20 Jul 2011 12:34:01 +0000

The laws of supply and demand apply are just two topics covered in economics textbooks. These carry heavy weight in the world of investing. For aspiring investors who have not seen the inside of a classroom for many years, brushing up on the basics of economics may be necessary. There are several ways of doing this and not all of them require re-enrolling in school.

Whether individuals buy gold coins or purchase stocks, the experience is more likely to be successful if they are familiar with economic fundamentals. On the Internet, it is easy to find free economics textbooks, Web sites dedicated to the topic, and online courses. This is not the easiest subject to master so an approach that combines several learning tools might be required.

Financial advisory firms sometimes offer basic economics seminars at no charge. They use these as a way to build their client base. The idea is that people will get just enough information to stimulate them to take the next step, which the advisor is happy to handle. Attending one of these and doing some self-directed investing can be just as successful.

Of course, the library is always there to provide a wealth of information in printed form. Some libraries have begun offering audio books and eBooks in an effort to be more media-friendly to patrons. At no charge, library card holders can learn everything they need to know about utility, elasticity, and various schools of economic thought.

If a classroom learning format is preferred, colleges offer continuing education classes on the topic. Some sessions are like seminars, lasting only one night, while others span a multi-week period. In addition to basic economic principles, attendees can learn about specific areas of economic focus. They should even be able to find broad-scale investing courses designed to help their foray into the marketplace be a positive one.

For those who want some practical tips, here is a good online resource explaining the basic economic concepts you must understand.

What Is A Bubble?

Robert Blossom — Tue, 24 May 2011 18:29:13 +0000

Unless you have been living under a rock, you heard the word “bubble” many times over the past years. Obviously I am talking about economic bubbles, including the stock market bubble, the real estate bubble, the technology bubble, the emerging economies bubble and, least but not last, the gold bubble.

But what exactly is a bubble?

According to Wikipedia, an economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is “trade in high volumes at prices that are considerably at variance with intrinsic values”.

In other words, a bubble requires two factors to happen: an asset that is being traded in high volumes, and prices that are much higher than the real value of the asset in question.

As you can see, high prices alone never indicate a bubble. Just because stock market prices are high, for example, it doesn’t mean that we are experiences a stock market bubble. This would only be the case if the price of most shared being traded was artificially higher than their real values.

The same is true for gold right now. While the price is on an all-time high (today it’s trading at $1524 per ounce), this alone doesn’t mean we are experiencing a gold bubble. This would would be the case if the real value of gold was much lower than $1,500 per ounce. But is it?

Many analysts don’t think so. In fact there are many predictions around that gold prices are going to break the $2,000 per ounce mark within the next 12 months.

Whenever you hear the “bubble” term in the future, therefore, don’t take it for granted. Instead, analyze whether the prices are high because the intrinsic value of the asset in question is indeed high (or getting higher due to other economic factors).

Why Recession is Starting Again

Robert Blossom — Fri, 29 Apr 2011 15:24:00 +0000

House prices are still falling. Wal Mart has seen 7 straight quarters of sales declines.

Unemployment is getting artificially “lower” because companies like McDonalds are replacing full-time employees with multiple part-time employees to save on insurance and other benefits. Can’t blame them — they’re just trying to survive.

Inflation is exploding through the roof. The “real” inflation rate is even worse than what the feds are reporting. Food prices are shooting toward the heavens, causing people to go hungry or force them to get food stamps.

Gas prices are killing us by making everything more expensive and penalizing those who don’t live next to their work. Unlike some expenses, this money is essentially burned.

Welfare is exploding with unemployment benefits, food stamps, and other forms of transferring wealth from creators to consumers. Most households now get more in welfare than they pay in taxes.

China’s economic growth is extremely inflated, meaning it could pop literally any month or year — making our already fragile situation even worse.

There is no fundamental recovery, and any economist who disagrees isn’t worth a nickel.

The only investment assets that seem to be a fundamentally good move for the next few decades are metals, farmland, cattle, woodland, and maybe residential real estate in “conservative” areas of the nation. The rest are iffy at best.

The important thing to do isn’t really to figure out which policy is best — you’re not congress or the president. You are, however, the commander in chief of your finances and maybe even your family’s finances. Because of this, it’s imperetive that you find ways to financially prepare for the next few decades.

Over the next week or two, I’ll be writing about ways to get ready — some will deal with gold, and others will deal with other steps that are necessary to be taken. Stay tuned.

Standard and Poors Changes US Outlook to “Negative”

Robert Blossom — Mon, 18 Apr 2011 16:21:48 +0000

Stocks are taking a massive dive on news that Standard and Poors, one of the leading rating and outlook agencies in the world, has changed its outlook on the United States. They now claim that our outlook is “negative”. They explain that our debt and budget deficits will probably not be remedied by our politicians.

In other words, now even politically correct parts of the financial establishment are agreeing that our government is too massive, spends too much money, and our politicians probably aren’t going to fix the system.

This is absolutely incredible, because it means that we all need to get used to the fact that the United States isn’t going to be getting out of debt, neither party seem to really care about anything besides politics, and the best thing to do is to prepare for higher prices and a lower dollar. How to do that? Two of the best ways are gold and silver coins.

Standard and Poors is right, though. The US economy and the federal government both don’t have incredibly bright fiscal futures. Just a few weeks ago, the government almost shut down, and plenty of believers in limited government somehow believed that it was because Republicans were fighting for a smaller government.

Unfortunately, they weren’t. Democrats and Republicans agreed on how much to “cut”. They just disagreed where. Both parties support the same size of government — they just disagree on exactly how to waste the money.

In the end, the cuts were made, and they ended up being actually less than 350 million. Not even 1% of 1% of a cut. This kind of “drastic” cut almost shut down the Federal Government. Politicians simply don’t have what it takes to get the job done in America.

So what should you do? I’m personally living frugally, and taking every dime I can get into financial security, which means a lot of silver and a lot of gold.