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With growing amounts of computational power, machine learning and deep learning are increasingly making their way into numerous sectors. They are widely used for recognizing objects, translating speech in real-time, determining potential outcomes, understanding consumer habits, making personalized recommendations, and a lot more. In fact, consumer market leaders such as Amazon, Netflix, Apple, Google, and Microsoft are all backed up by these technologies.
Still, some questions remain uncertain. What do these two entail? And should companies invest in machine learning development to benefit their businesses? We provide the answers to these questions in our article.
What is Machine Learning?
Machine learning combines the principles of computer science and statistics. It focuses on solving real-world problems with neural networks designed to mimic our decision-making. Machine learning engineers create statistical models used for making predictions and identifying patterns in data. Its main objective is to build algorithms that can receive input data and use statistics for prediction without being explicitly programmed.
Machine learning uses algorithms to analyze data, learn from that data, and make informed decisions based on what it has learned. It is employed in a range of computing tasks where designing and programming explicit algorithms with excellent performance are difficult or infeasible. Thus, with the help of machine learning, software applications can become more accurate in predicting outcomes, automatically recognizing unknown patterns, obtaining deep insights, and creating high performing predictive models from data.
How companies leverage machine learning
On the whole, machine learning enables companies to optimize their processes and increase customer satisfaction. It has a lot of applications ranging from price prediction and service automation to detection of fraudulent credit card transactions or network intruders. Among the most powerful machine learning applications in a business setting are:
- Fraud detection
According to ACFE, businesses lose on average 5% of revenues each year due to fraud. Machine learning algorithms use pattern recognition and other techniques to spot anomalies, exceptions, and outliers by building models based on historical transactions, social network information, and other external data sources. So machine learning development enables companies to detect and prevent fraudulent transactions in real-time.
For instance, banks can utilize historical transaction data for building algorithms that recognize fraudulent behavior and discover suspicious patterns of payments and transfers between networks of individuals with overlapping corporate connections. This kind of algorithm-based security applies to a wide range of scenarios, including cybersecurity and tax evasion.
To find out more about security, regulations, and software development, read our article.
- Predictive maintenance in IoT
IoT solutions with built-in sensors are widely used for equipment maintenance. They gather data about everyday objects, such as fuel gauges and tires, and share it across a network. With the help of machine learning, IoT systems can analyze various data patterns such as temperature and humidity to predict performance and further outcomes.
For instance, Caterpillar utilizes IoT and machine learning to uncover patterns in equipment and device data. The company identified that fuel meter readings were correlated with the amount of power used by on-board refrigerated containers. Caterpillar used that data to optimize operating parameters by modifying generator output. This resulted in impressive cost savings (of more than $30 per hour or $650,000 over a year).
- Service personalization
Machine learning and AI enable companies to provide high-quality customer care by combining historical customer service data, natural language processing, and machine learning algorithms that continuously learn from business interactions. Thus customers can ask questions and get immediate answers generated by the algorithms.
So customer service representatives can get involved only in exceptional cases, while the algorithms can take over not only routine tasks but also more advanced communication. In fact, around 44% of U.S. consumers have stated that they prefer chatbots to humans regarding customer service efficiency and this is just the beginning of the AI era.
If you are looking for an AI development vendor, check out our article on the best AI development companies in Europe.
What is Deep Learning?
In practical terms, deep learning is a subfield of machine learning which conducts supervised or unsupervised learning from data, using multiple internal layers of nonlinear processing units. While traditional machine learning algorithms are linear in nature, deep learning algorithms are stacked by increasing complexity. Software programs use the deep learning approach to apply the knowledge gained from the preceding layer of hierarchy.
With the help of DL, precise details are cognitively spotted in the automated learning process and later applied for accurate decision making. Deep learning can accelerate the problem-solving process for certain types of complex computer issues, most notably in the computer vision and natural language processing (NLP) fields. Deep learning also involves mathematical modeling where some of the components can be adjusted to better predict the final outcome.
On the whole, a DL model is designed to continually analyze data with the human-like logic structure. To achieve this, deep learning engineers use a layered structure of algorithms called an artificial neural network (ANN), which is inspired by the biological neural network of the human brain. This makes for machine intelligence that’s far more capable than standard machine learning models.
While both machine learning and deep learning fall under the broad category of AI, deep learning is most commonly behind human-like artificial intelligence software.
How deep learning is creating value for companies
Global brands adopt deep learning to recognize speech or gestures, analyze documents and pictures connected to a large database, translate speech in real time, build recommendation systems, and more. For instance, Google, Apple, and Microsoft utilize deep learning in their voice and image recognition algorithms, while Netflix and Amazon use it for analyzing and influencing consumer decision making. However, deep learning has a number of other revolutionary use cases such as:
- Pattern recognition
Deep learning is widely used for recognizing patterns, which allows companies to monitor and process a multitude of things. For instance, PayPal utilizes deep learning via an open-source predictive analytics platform H2O to prevent fraudulent payment transactions or purchases.
Another example is Enlitic, which uses deep learning to process X-rays, MRIs, and other medical images to help doctors diagnose and treat various diseases. The company uses deep learning algorithms that can discover the subtle patterns which characterize disease profiles. Deep learning networks can also provide rich insights in terms of early-stage disease detection, treatment planning, and monitoring.
- Drug discovery and medical treatment
Modern researchers use deep learning for drug discovery by combining data from a variety of sources. It helps them predict novel candidate biomolecules for several disease targets (most notably treatments for the Ebola virus, etc.) or discover new kinds of medicine.
For instance, Bay Labs – a healthcare startup applies deep learning to medical imaging to help in the diagnosis and management of heart disease. With the help of deep learning, Bay Labs has potential to dramatically impact the leading cause of death, cardiovascular disease by improving access, value, and quality of medical imaging.
In addition, an AI startup Atomwise uses deep learning algorithms to solve the problem of drug discovery. Deep learning networks help to discover new medicines, as well as explore the possibility of repurposing known and tested drugs for use against new diseases.
Deep learning in cybersecurity allows the companies to reduce risks and expenses associated with failing to detect a threat. It deals efficiently with malware, malicious URL, and malicious code detection. Its self-taught algorithms recognize user activities which might put valuable data at risk and act to isolate them. In fact, deep learning can automate intrusion detection with impressive accuracy.
Machine learning and especially deep learning are revolutionizing many industries today including fintech, healthcare, transportation, edtech, etc. They show great potential in terms of developing autonomous self-taught machine learning applications, which can be used for detecting fraud, forecasting results, attracting new customers, and much more. However, there is a shortage of machine learning engineers on the world market, and companies need to develop effective strategies for resolving this challenge.
If you want to find out more about practical use cases of machine learning and deep learning or you need to build self-taught analytical tools, feel free to contact our machine learning experts.
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WHICH PROBLEMS CAN EMERGE FROM INFORMATION DISTORTION ALONG THE SUPPLY CHAIN?
A supply chain is composed of several stages and actors. When stakeholders fail to communicate and work together properly, mistakes are likely to happen. One of the problems that can emerge from lack of communication and widespread disorganization is the Bullwhip Effect (also known as the Whiplash Effect), which we are going to explore further in this article.
The Bullwhip Effect: definition
The Bullwhip Effect can be described as a case in which the orders sent to manufacturers and suppliers create a larger variance then the sales to the end customers. This variance, which emerges in the lower part of the supply chain, can explode higher up.
In other words, the higher links in the supply chain could overestimate (or underestimate) the actual product demand, causing significant, dangerous fluctuations.
Whiplash Effect: a practical example
Let’s say that a customer asks for 7 product units (e.g. 7 umbrellas). In order to have enough units for his clientele, the retailer involved in the transaction could decide to order 10 umbrellas. The retailer’s supplier is probably going to order 15 units in order to not go out of floor stock, or because of the benefits of block purchasing.
When the manufacturer receives the order, he could decide to order in bulk from his supplier – so, let’s say that he is going to finally produce 30 umbrellas.
This whole process shows us that, in the face of a 7 umbrellas order, we are left with 30 umbrellas (23 more than the units which have been actually requested).
The final stage of the process is that, as a result of overproduction, the retailer will be forced to drop prices in order to increase demand and dispose of the products.
Factors to consider
The Bullwhip Effect is one of the most common problems in supply chain management. In order to prevent it, we have to take into account the factors which contribute to create it. Below you can find a list of the main issues you should carefully consider:
- Lack of communication
All the links composing the supply chain should be able to communicate quickly, efficiently, and smoothly in order to avoid skewed perceptions of the actual demand.
- Free return policies
Consumers might be tempted to willingly inflate their demands due to shortages or convenience (e.g. ordering two different sizes of the same dress to choose the one that fits better). This levity may lead retailers to overestimate the actual demand and end up with excess units.
- Price variations
Special discounts and clearance sales can change the regular buying patterns of a large number of consumers. Buyers aim to take full advantage of these situations and, since discounts are offered only within a short timeframe, they can inflate demand.
- Aggregate orders
Many companies accumulate their customers’ requests so that they can place fewer orders (e.g. making weekly or monthly orders). As a consequence, at certain times it might seem that the demand for a specific product is growing – but it’s just the misleading result of order batching. Moreover, this distorted information may lead to wrong estimates about demand and fluctuations.
As the Whiplash Effect is a common problem for supply chain management, we should all examine the origins of the phenomenon in order to find effective strategies to limit the damage and make our supply chains more and more efficient and cost effective.
Did you find the article helpful? Share it on your social media!
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Agriculture remains the mainstay of Malawi’s economy, accounting for about 30 percent of Gross Domestic Product (GDP) and generating over 80 percent of national export earnings (Annual Economic Report, 2015). It also provides employment to about 80 percent of the rural population, which is dominated by small-scale farmers. In any agricultural production systems, seed of high quality remains the most critical input and must be accessible and affordable when required. The Government of Malawi recognizes the importance of high quality seed of improved crop varieties for improved productivity, food and nutrition security. As such the government develops various legislations to create a conducive environment for seed industry growth and enhanced availability of high quality seed to farmers.
The government established the Seed Services Unit (SSU) in the Department of Agricultural Research Services (DARS) of the Ministry of Agriculture, Irrigation and Water Development (MoAIWD) as the official seed certification office in 1976. The Unit guided by the 2018 seed policy and empowered by the 1996 Seed Act is mandated to ensure that high quality seed of improved crop varieties is produced and made available to the farming community. The main SSU is located at Chitedze Research Station in Lilongwe, and where its seed testing laboratory is accredited to the International Seed Testing Association (ISTA) since 1982. The Unit is in the process of getting accreditation to Organization for Economic Corporation and Development (OECD) to ensure competence in seed certification. Three satellites SSU were established at Lunyangwa Research Station in the North, Lifuwu Research Station along the lake shore and Bvumbwe Research Station in the South to cater for seed producers in the three regions.
The Growth of Seed Industry
Malawi has seen increase in number of industry players since 2005 with the introduction government input subsidy program where resource poor farmers are targeted to access fertilizer and seed at subsidized prices through the voucher system. Maize and legume seed since 2005 have been accessed by famers in huge volumes and in past three years government has included Sorghum and Rice as certain districts are the main food crops. To respond to increased seed demand the number of seed companies has increased to 24 from just 5 in 2005. There has also been increase in number of agrodealers to handle the increased volume of seed due to the farm input subsidy program. To handle the increase in certification services required, the government trained para seed inspectors to ensure that seed fields are adequately inspected. There are now proposals to accredit licensed private seed inspectors to further ease the workload and ensure high quality seed production in Malawi. On average 1.2million ha is put under maize grain production and 180 thousand ha beans and groundnuts each and about a 100 thousand ha of Soya. These are main crops whose seeds are bought by farmers in huge volumes. There are also promising crops that are being promoted such as sunflower, chickpeas sesame etc. The market also exists in vegetable sub sector as all seeds are being imported.
Historic Seed Availability (MT)
[ultimatetables 1 /]
Graph Showing number of seed companies in Malawi as of 2020
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RISK AWARENESS WEEK 2019 So many amazing workshops, consider upgrading for a full access pass
Imagine the accountant who says "I don't need to know arithmetic because I have accounting software." Risk management is based on principles involving the arithmetic of uncertainty, which is governed by only a few additional rules beyond normal arithmetic. The free tools at ProbabilityManagement.org allow you to do the arithmetic of uncertainty in native Excel.
The Five Mindles of Uncertainty Risk vs. Uncertainty reminder Visualizing uncertainty Combining uncertainties (Diversification) Flaw of Averages (Strong Form) Interrelated Uncertainties SIPmath Tools
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What is 97l?
What is it? Invest 97L is the current classification of the tropical wave on the way to the Caribbean. … “Invests” are the classification given by the National Hurricane Center to tropical disturbances that may develop into organized depressions, storms, or future hurricanes.
How are tropical invests named?
Invests are numbered from 90 to 99, followed by a suffix letter “L” in the North Atlantic basin, “E” and “C” in the Eastern and Central Pacific basins (respectively), or “W” in the Western Pacific basin. Numbers are rotated within the season and are re-used as necessary (the next invest after 99 would be numbered 90).
How are tropical storms categorized?
In order to categorise tropical cyclones around the world, the Saffir-Simpson Hurricane Wind Scale is used defining events by their wind speed and impacts. … Tropical cyclones with wind speeds up to 38mph are classified as tropical depressions and those with wind speeds from 39 – 73 mph are classified as tropical storms.
What is the difference between a hurricane and a post tropical cyclone?
Hurricanes and tropical storms often transition to cold core cyclones. When the National Hurricane Center concludes that a tropical storm has transitioned to a (cold core) mid-latitude storm it will designate it as “post-tropical” meaning that it has transitioned to a non-tropical storm.
What is the newest hurricane?
Hurricane Dorian’s winds strengthen to 140 mph
Hurricane Dorian continues to strengthen on Friday night, with maximum sustained winds of up to 140 mph, according to the National Hurricane Center.
Why are tropical disturbances called Invest?
An invest in meteorology (short for investigative area, alternatively written INVEST) is a designated area of disturbed weather that is being monitored for potential tropical cyclone development.
How is a tropical wave formed?
Tropical waves in the Atlantic Ocean form from disturbances which drift off the continent of Africa onto the Atlantic Ocean. These are generated or enhanced by the African Easterly Jet.
What does tropical storm mean?
A tropical storm is a tropical cyclone that has maximum sustained surface winds ranging from 39-73 mph (34 to 63 knots). Hurricane. A hurricane is a tropical cyclone that has maximum sustained surface winds of 74 mph or greater (64 knots or greater).
What are the three types of tropical storms?
Meteorological hazards: Tropical storms, hurricanes, cyclones and typhoons. Tropical storms, cyclones, hurricanes and typhoons, although named differently, describe the same disaster type.
What are the 4 major types of storms?
Types of storms
- Heavy rain.
- Ice storms.
What are the 3 regions of a tropical storm?
The main parts of a tropical cyclone are the rainbands, the eye, and the eyewall. Air spirals in toward the center in a counter-clockwise pattern in the northern hemisphere (clockwise in the southern hemisphere), and out the top in the opposite direction.
What is the most dangerous part of a hurricane?
What is the largest part of a hurricane?
The eye at a hurricane’s center is a relatively calm, clear area approximately 20-40 miles across. The eyewall surrounding the eye is composed of dense clouds that contain the highest winds in the storm.
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- Research article
- Open Access
A social cost-benefit analysis of meat taxation and a fruit and vegetables subsidy for a healthy and sustainable food consumption in the Netherlands
BMC Public Health volume 20, Article number: 643 (2020)
Implementation of food taxes or subsidies may promote healthier and a more sustainable diet in a society. This study estimates the effects of a tax (15% or 30%) on meat and a subsidy (10%) on fruit and vegetables (F&V) consumption in the Netherlands using a social cost-benefit analysis with a 30-year time horizon.
Calculations with the representative Dutch National Food Consumption Survey (2012–2014) served as the reference. Price elasticities were applied to calculate changes in consumption and consumer surplus. Future food consumption and health effects were estimated using the DYNAMO-HIA model and environmental impacts were estimated using Life Cycle Analysis. The time horizon of all calculations is 30 year. All effects were monetarized and discounted to 2018 euros.
Over 30-years, a 15% or 30% meat tax or 10% F&V subsidy could result in reduced healthcare costs, increased quality of life, and higher productivity levels. Benefits to the environment of a meat tax are an estimated €3400 million or €6300 million in the 15% or 30% scenario respectively, whereas the increased F&V consumption could result in €100 million costs for the environment. While consumers benefit from a subsidy, a consumer surplus of €10,000 million, the tax scenarios demonstrate large experienced costs of respectively €21,000 and €41,000 million. Overall, a 15% or 30% price increase in meat could lead to a net benefit for society between €3100–7400 million or €4100–12,300 million over 30 years respectively. A 10% F&V subsidy could lead to a net benefit to society of €1800–3300 million. Sensitivity analyses did not change the main findings.
The studied meat taxes and F&V subsidy showed net total welfare benefits for the Dutch society over a 30-year time horizon.
There is a growing consensus that decreasing the environmental impact from food production and consumption are crucial to meet the Paris Climate Agreement and its goal to limit global warming [1, 2]. This is not surprising considering that agriculture and food production contribute an estimated 25% of total greenhouse gas (GHG) emissions . Meat and dairy production is observed to be a disproportional contributor of emissions, attributing approximately half of food-derived GHG emissions, while only accounting for one-third of the dietary energy intake worldwide [1, 2, 4, 5]. Our dietary pattern not only affects our environment, it also influences our health . A Western-type diet, characterized by a high red meat, processed meat, pre-packaged foods, fried foods, refined grains, and high-sugar drinks, has been strongly associated with non-communicable diseases (NCDs) such as cardiovascular diseases, diabetes, and cancer [1, 7, 8]. Consumption of red and processed meat exceeds recommended levels in most high and middle-income countries and has been associated with both negative health and environmental impacts [9, 10].
Recent modelling studies suggested that replacing meat with plant-based foods [8, 11], or selecting foods with low carbon footprints reduce environmental impact and increase health. Nevertheless, the current Western diet is neither sustainable nor healthy [12,13,14,15]. The link between individuals’ environmental concerns as citizens and their behaviour as consumers were found to be quite weak and did not appear to influence meat-buying habits . Consumers are not clear about healthy eating and everybody interprets it differently [17, 18]. This might even more apply to what it means to eat sustainable and environmentally friendly.
Governments may implement policy measures to stimulate healthy and sustainable choices. Systematic reviews demonstrate that subsidies to increase consumption of healthy foods and taxes to decrease consumption of unhealthy foods might be effective interventions in improving dietary behaviours and health [19, 20]. Similarly, modelling studies from various European countries predict taxes based on GHG emissions to be feasible to change dietary behaviours towards food groups with a lower environmental footprint [21,22,23,24]. Springmann et al. (2016) have estimated that the worldwide impact of taxing diet-related GHG emissions could result in a 9.6% decrease in GHG emissions originating from food production, while avoiding 500,000 deaths annually .
Price interventions may not only influence environment and health, but also have effects on other aspects of society, for example economic and distribution effects. A social cost-benefit analysis (SCBA) can incorporate these effects into a single analysis . The SCBA is an instrument that can provide an overview of the (dis)advantages of measures, if possible quantified in euros and presented as a balance . In this study, a SCBA was used to estimate and monetize the 30-year societal effects of a tax on meat and subsidization of fruit and vegetables (F&V) in the Netherlands.
The essence of the SCBA framework is to estimate all (positive and negative) effects of a policy scenario on the total welfare of a population. A policy scenario is compared to a reference scenario without the policy but considering other autonomous trends in society. Various stakeholders (e.g. government and consumers) are identified in the society potentially affected by the policy (Supplemental file 1). An overview of the included societal effects and their indicators is presented in Table 1.
Three scenarios were analysed within this study and compared to a reference (autonomous, no price change) scenario. Two taxation scenarios for total meat projected a 15% or 30% price increase at the consumer level whereas one scenario involved a subsidy on F&V resulting in a 10% price decrease. This manuscript does not discuss the way the price increase is implemented, e.g. via a CO2-tax, via a VAT in- or decrease of specific foods, or excise. The current Value Added Tax (VAT) in the Netherlands is 6% on foods but 21% on most other services and goods. The 15% meat tax is based on this transition. On all foods some level of VAT is required, therefore we arbitrarily selected the 10% discount for the fruit and vegetables scenario.
Current food consumption in the Netherlands was obtained from the Dutch National Food Consumption Survey (DNFCS) 2012–2014 . Food intake data from a representative sample of the population living in the Netherlands was collected between 2012 and 2014 on 2 non-consecutive days using 24 h dietary recalls. Only the consumption data for meat (red meat, processed meat, and poultry) and F&V were used for this study (Supplemental file 2). In the reference scenario, consumption changes over time were age and sex dependent but without an autonomous increasing or decreasing trend.
Price elasticities to calculate changes in consumption following a price change in the scenarios were obtained from a systematic literature review . For total meat (red, white, and processed) the mean estimated price elasticity was − 0.60 (95% confidence intervals (CI): − 0.66; − 0.54) and for F&V -0.53 (95% CI: − 0.59; − 0.48). Consumption changes over time were calculated using the Dynamic Modelling for Health Impact Analysis (DYNAMO-HIA) model . See for more model details the next section.
Health impact assessment
The DYNAMO-HIA model was used to assess health impact of the scenarios . DYNAMO-HIA is a Markov-type state-transition model and combines micro simulation of the risk factor and macro simulation of the disease and survival, using individual life tables with 1-year intervals to estimate developments in health over time. Boshuizen et al. describe the model in more detail and Lhachimi et al. assessed the model’s validation . New-borns and population size per given age and sex of the Netherlands derived from Statistics Netherlands were used as population input in the model.
Five diseases, diabetes type 2, stroke, lung cancer, coronary heart disease (CHD) and colorectal cancer, associated with meat and fruit and vegetables intake were assessed . Disease incidence and prevalence of these five diseases in the Netherlands were included into the model based on Statistics Netherlands data of 2011. Disease disability and excess mortality weights of the model were used and were collected within the DYNAMO-HIA consortium in 2010.
Risk factor categories for the model were created using the relative risks (RR) of red and processed meat, and F&V consumption derived from a 2015 systematic literature review by the Dutch Health Council . Since white meat (chicken and turkey) consumption is not associated with health it was not included in the health modelling.
Health effects were estimated by comparing the effects of the intervention compared to a reference scenario, in which no policy measures were implemented. Yearly differences in modelled chronic diseases and subsequent Quality Adjusted Life Years (QALYs) values between the reference and intervention scenarios were extracted from the model.
Uncertainty around the DYNAMO-HIA model estimates were evaluated using Monte Carlo simulations based on the 95% CI of the relative risk estimates, assuming a normal probability distribution. The 95% CI of 100 simulations per scenario are reported. Transition rates of risk factor categories were estimated using the method described by Van de Kassteele et al. . The model presented increased or decreased health by calculating gained or lost QALYs. More details of the DYNAMO-HIA modelling are presented in Supplemental file 2.
Environmental impact assessment
The environmental impacts of food were estimated with Life Cycle Analysis (LCA), a methodological tool to assess the environmental impact through the life cycle of a product (farm to plate principle). Supporting Life Cycle Inventories (LCI) data, individual unit processes in a supply chain, representative for Dutch market situations were provided by Blonk Consultants and were saved in SimaPro (version 8.52, PRe Consultancy B.V., Amersfoort, the Netherlands). Blonk consultants provided data on 225 foods in the Netherlands, covering approximately 80% of foods consumed in the DNFCS . A panel of RIVM scientists performed extrapolations of the data to all foods consumed in the DNFCS 2012–2014. Environmental impact of the food products was then estimated using ReCiPe 2016 . Environmental impact indicators that were estimated in the ReCiPe model were greenhouse gas emissions (kg CO2-eq), acidification (kg SO2-eq), eutrophication of salt (kg N-eq) and fresh (kg P-eq) water, and land use (m2a).
Efficiency gains in production of foods over time were estimated with the observed average change in GHG emissions intensity of the Dutch agro- and fishery industry . Between 2000 and 2016, the relative intensity decreased by 20% (1.25% per year). This decrease was further linearly projected up to 2048 in the main analysis for all environmental impact indicators. See Supplemental Table 3 for more detail on the environmental impact assessment.
Monetization of estimates
We applied both a value of €50,000 and €100,000 per QALY gained derived from the DYNAMO-HIA model and assumed the QALY value to remain stable over time, per Dutch guidelines [26, 31]. By using the QALY value in the main analyses, we assumed that consumers in their food choice decisions do not already value health aspects (informed consumers). Direct healthcare costs for diseases associated with consumption of meat and F&V were estimated using data from the Dutch Cost of Illness tool . See for more details Supplemental file 1.
Environmental effects were monetized using the mean costs of GHG emissions (€0.057 per kg CO2-eq), acidification (€5.40 per SO2-eq), eutrophication of salt (€1.90 per kg N) and fresh (€3.11 per kg P-eq) water, and land use (€0.0261 per m2) estimated specially for the Dutch situation (see Supplemental file 3, ).
Within the SCBA framework, additional societal effects such as productivity, consumer surplus and tax income and subsidy expenses are also considered. The three components of productivity include absenteeism, presenteeism, and labour participation. Labour participation and productivity effects were estimated using the human capital method, according to Dutch guidelines . The number of prevented cases of disease between 15 and 75 years old, the definition of the working population by Statistics Netherlands (CBS), was extracted from DYNAMO-HIA. To prevent double counting of effects, only income tax and welfare payment effects following changes in labour participation were considered, as shown by Koopmans et al. . Productivity gains were estimated using the costs of absenteeism and presenteeism, which was estimated using absenteeism and presenteeism estimates of the modelled chronic diseases derived from Loeppke et al. .
For the meat scenarios, policy revenues were a combination of tax income minus the loss of VAT because of the reduced consumption. For the F&V scenario, these were the additional VAT benefits from an increased consumption minus the subsidy costs. The revenues were based on average cost per kg meat of F&V derived from CE Delft, adjusted yearly using the mean composite Consumer Price Index of the product category between 1996 and 2017 [34, 48].
Consumer surplus (CS), the welfare consumers derive from purchasing and consuming, was estimated by using the rule-of-half (RoH, see formula 1). The RoH approximates the changes in consumer benefits and is proscribed to estimate the changes in CS by Dutch SCBA guidelines . The last societal effect was the estimated policy implementation costs. To account for time effects, in the main analyses a discount rate of 3% per year was used for all indicators (Supplemental file 1).
A one-way sensitivity analysis of the impact of different price elasticities on consumption and its related consequences was conducted. The price elasticity estimate was varied by adopting the upper and lower bound of the 95% confidence interval of the point estimate in assessing the change in consumption following a price intervention .
For the environmental impact calculations, a high and a low costs scenario were implemented. In the high costs scenario (High Environmental Costs-Low Efficiency Gains, HEC-LEG), the environmental impact indicators have high prices and in addition, the yearly efficiency gains in production were estimated to be low. In the low costs scenario, LEC-HEG, the opposite was estimated: low environmental impact costs at a high (1.75% per year) efficiency gain in production (Supplemental file 3).
Furthermore, the net welfare benefits were estimated when using a friction cost approach (instead of the human capital approach) to estimate productivity and participation. In addition, a perfect information scenario was calculated. In such a case, it is assumed that consumers consider and value all (known) costs, including (long-term) health before buying and consumption and therefore QALY gains or losses should not be considered. We also assessed the effect of changes in the discount rate used, by applying a rate of 1.5 and 4%, respectively .
In the reference scenario, in 2048, the total Dutch meat consumption is estimated to be 665,581,000 kg (kg). This translates to an average meat consumption of 39.2 kg per person per year or 107 g per day. A price increase of 15% or 30% is estimated to reduce the average meat consumption to 98.2 g per day in the 15% tax scenario and 90.3 g per day in the 30% tax scenario in 2048 (Fig. 1). In 2048, the estimated total F&V consumption is 1,551,853,000 kg or 250 g per day. Following the price decrease of 10%, the average consumption is estimated to increase to 261 g per day.
Health impact assessment
Figure 2 presents the average modelled number of cases prevented per disease in the respective scenarios. In absolute numbers, a meat tax has the most impact on diabetes type 2 prevalence, with between 2093 and 15,449 (15% tax) or 5550–29,398 (30% tax) averted cases in the year 2048 (supplemental file 2). In the meat tax scenarios the incidence of CHD increases slightly, between 132 and 787 (15%) or 240–1506 (30%) additional cases, because of the reduction in the prevalence of the other four diseases. The F&V subsidy has most impact on stroke prevalence, between 1834 and 3586 averted cases in 2048. The number of QALYs gained in the year 2048, compared to the reference scenario is between 1119 and 3525 for the 15% meat tax scenario, 2122–6691 in the 30% meat tax scenario, and 1629–2483 in the 10% F&V subsidy.
In the reference scenario, total environmental impact of meat consumption in 2048 is estimated to be approximately 15,225,000 ton CO2-eq (GHG emissions), 190,000 ton SO2-eq (acidification), 3000 ton P-eq (fresh water eutrophication), 33,000 ton N-eq (salt-water eutrophication), and 11,000 km2 (land use). In 2048, in the 15% taxation scenario, reductions in impact of 900,000 ton CO2-eq, 11,000 ton SO2-eq, 200 ton P-eq, 2000 ton N-eq and 750 km2 could be achieved. This is an 8.6% reduction for all impact categories over 30 years. In the 30% taxation scenario, the reduced consumption of meat could account for a 16% decrease in environmental impact compared to the reference scenario. In 2048, the estimated environmental impact of F&V consumption in the reference scenario is estimated to be 2000,000 ton CO2-eq (GHG emissions), 6000 ton SO2-eq (acidification), 200 ton P-eq (fresh water eutrophication), 1400 ton N-eq (salt water eutrophication), and 250 km2 (land use). The estimated higher consumption after a 10% subsidy of F&V could result in an increase of the environmental impact by 4.5% in 2048 (90,000 ton CO2-eq, 250 ton SO2-eq, 7 ton P-eq, 60 ton N-eq, and 11 km2).
Social cost-benefit analysis
Total monetized effects over a 30-year period are presented in Table 2. In the 15% tax scenario, all benefits and losses lead to an overall net societal benefit between €3100 and 7400 million when a QALY value of €50,000 was applied. Introduction of a tax leading to a 30% price increase on meat-based products is estimated to result in overall benefits between €4000 and 12,300 million over 30 years. Subsidization of F&V is estimated to amount to an overall net societal benefit between €1800 and 3300 million.
Stratifying the costs and benefits by consumers and governments, indicate that in the tax scenarios for consumers their positive health effects are outweighed by the loss in consumer surplus resulting in a net loss of welfare, especially in the 30% meat tax scenario (Table 3). However, in the F&V subsidy scenario, consumers benefit both from health gains as well as from an increased consumer surplus adding to their net social welfare. Because of the revenues of the tax and costs of the subsidy, the net benefits for the governments are in the tax scenario and net costs in the subsidy scenario.
Results of the sensitivity analyses are illustrated in Fig. 3. Except for one analysis, the minimum estimated net benefits for society remained positive. In the 30% meat tax scenario (with a QALY value of €50,000), in which the costs incurred for environmental impact indicators is low and food production systems have a high efficiency gain (1.75% per year) over time results in a net welfare between €-141–8085 million. In the sensitivity analyses involving a higher discount rate (4% instead of 3%), using the friction cost method instead of the human capital approach, lower price elasticities, or perfect information of consumers, the estimated benefits for society could be lower than observed in the main analyses (Fig. 3). In contrast, choosing a lower discount rate (1.5% instead of 3%), environmental impact indicators at a high cost level with a limited gain in production efficiency over time, and assuming higher price elasticities would be scenarios in which the estimated benefits could be higher compared to the main analyses.
A price increase for meat through a tax could lead to a net societal benefit for the Netherlands of about €3100–7400 million or about €4100–12,300 million for respectively a 15 or 30% tax over a period of 30 years. A price decrease of F&V by means of a subsidy could lead to a net societal benefit of about €1800–3300 million. Important contributors to net welfare gains or losses are consumer surplus and policy revenues/costs. Several assumptions, such as estimated costs of environmental impact indicators and production efficiency gains over time, as well as selected discount rate or using the informed consumers’ assumption were shown to have a large impact on the estimated results. However, in almost all sensitivity analyses the total estimated effect was still a net welfare benefit for society.
A SCBA aims to take into account all types of costs and benefits of interventions, irrespective of which stakeholders win or lose from the policy scenarios. However, it is also important to show the distribution of these benefits and costs over the different parties, especially when the losses are financial while the gains are non-financial, such as a gain in QALYs. In the tax scenarios, consumers could be net payers because of the loss of consumer surplus, whereas the government could gain income from the tax revenues. For the subsidy scenario, this is the other way around.
Even though no study as of yet has estimated the total societal effects of a tax on meat or subsidies on F&V, various studies have assessed the effects on consumption, health or environment separately. Mhurchu et al. estimated a 2% decrease in all-cause mortality following a 20% subsidy on F&V in a modelling study in New Zealand . In Sweden, Sall and Gren estimated a variable environmental tax (9–30%) on meat and dairy to decrease GHG emissions by 12%, at a specific point in time . Briggs et al. applied a tax of £2.72/ton carbon dioxide equivalents/ 100 g product applied to all food and drink groups with above average GHG emissions in the United Kingdom . They estimated GHG emissions reductions up to 18,683,000 ton CO2−eq per year compared to the current situation, while saving 7700 lives per year. In our current study, introduction of a 15% tax on meat could reduce GHG emissions by 3,600,000 ton CO2-eq in 2048 if our population size were similar to the UK, which population is around four times larger. This might be an indication that taxing of all foods with above average GHG emissions is more effective than singling out only meat.
In a recent paper, Springmann et al. estimated the global and national health care costs related to meat consumption and calculated from this the price of meat if all health effects were incorporated in the price . In Western countries, such as the Netherlands, the increase in price should be 21.3% for red meat and 111.2% for processed meats.
In addition to integrating health in the price of foods, also environmental and social factor could be added to calculate the ‘true price’ of a food . Evidently, as Springmann et al. described that integrating health would already add 20% (red meat) and more than 100% (processed meat) to the price, integrating these other components would add to this even more. From a societal perspective, in the current analyses, it showed that the meat tax scenarios of 15% or 30% could result in net benefits for the society. Although it is clear, that not all health and environmental costs are then covered.
The analyses focus on the Dutch consumption, but the global perspective used in the article of Springmann et al. indeed is important to take into account. When price policies are applied only nationally, there will be trading effects with economic consequences that are yet not included in the current analysis. In addition, foods and feed are imported from other regions. International or European agreements will be important to prevent the possibility of carbon leakage, in which the emission reduction by one country is followed by an increase in another country, as environmental effects are not confined to national borders [23, 54]. The used environmental impact is based on average Dutch market (including import) food consumption data and their monetized values are not specific for the agro sector . For monetized local environmental effects of Dutch foods this might be a good estimation, but some of our consumed foods and feed are imported and the associated environmental impact and associated costs are located in other countries .
Changing prices of food products will likely have diverse effects on groups within society, in particular regarding socio-economic status (SES). While the environmental impact of food consumption is similar between SES groups, low SES groups generally have an unhealthier diet and tend to eat less F&V and fish and more meat and fats compared to higher SES groups [28, 55]. A recent Dutch study indicates that the socioeconomic differences in healthiness of the diet are likely to further increase . As low SES groups have been observed to be more responsive to the price of food, price intervention policies could be an effective approach to increase healthiness and environmental friendliness of diets . A combined taxation on meat and a subsidy on F&V could compensate some of the losses felt especially in the low SES groups. The current model did not allow a combined calculation of the subsidies and taxes and for stratification by SES, which is predicted to be more effective and result in higher societal benefits than single interventions. In addition, more research is needed to estimate cross-price elasticities by SES as well: which foods items will be consumed more often to replace the more expensive meats.
Discouraging meat consumption is highly related to current consumption levels and disease profiles of countries . Although linked to adverse health effects on noncommunicable diseases, such as colorectal cancer and cardiovascular diseases at high consumption levels, meat is a nutrient-dense food in itself. In developing countries, because of the very low meat consumption, an small increase of meat consumption could help to alleviate some of the micronutrient deficiencies [10, 52]. It should also be noted that sustainable diets are only a part of the solution towards a more sustainable consumption pattern . Using renewable energy sources, recycling waste, using trains instead of airplanes are, among others, additional steps for a sustainable future .
This study has a number of strengths. The consumption data was from a representative sample of the Dutch population . Estimated total Dutch consumption of meat at baseline is in line with other reports on Dutch consumption of 77 kg meat (excluding bones 38 kg ). Relative risks related to food consumption are supported by consistent and strong evidence derived from a systematic literature review . The DYNAMO-HIA model allows dynamic simulations and used Dutch data as input with an integration of the range of the estimates. Additionally, the used environmental data were obtained from 2018 LCA analyses tailored for the Dutch food consumption context. The SCBA framework allows for comparison between different fields such as health, environmental and other societal effects by monetizing the effects allowing us to estimate the societal impact of taxes on meat or subsidies on F&V. The Dutch guidelines on SCBA analyses in the health and environmental domains were followed [26, 31, 49]. Finally, several multiple sensitivity analyses were used to demonstrate the effect of different input parameters and methods on the net societal benefit.
Like any modelling study, the current study also has limitations to consider. Firstly, in the model, cross-elasticities could not be used to consider replacements following a decrease in meat consumption. Replacement foods could be healthy and sustainable, such as F&V, but also have high environmental impacts or negative health effects, such as cheese. In addition, the DYNAMO-HIA model is limited to one risk factor, and thus does not allow for analysis of a combination scenario of a meat tax and F&V subsidy. A replacement food may also partly compensate for the lost consumer surplus experienced in the meat tax scenario. Secondly, when considering the consumption in the reference scenario, meat and F&V consumption were assumed similar over time per age and sex category. An autonomous trend in food consumption patterns was not included, as there was no conclusive evidence available about the changes in meat and F&V consumption in the Netherlands [28, 55, 57]. In addition, whether the number of vegetarians/vegans would increase following an increase in price of meat-based products or a decrease in price of F&V could not be predicted. Thirdly, the health modelling was performed using categorization of food consumption. As the observed effects in food consumption were relatively small, the categorization might lead to an underestimation of the true effect on health when the change is not large enough to be placed in another consumption category, while any change in food patterns, even small ones, may have positive effects for health and environment at population level. Fourthly, the used SCBA framework uses monetization of effects in order to estimate societal benefits or costs, comparing a scenario with a reference scenario. In the SCBA, consumer surplus was one of the largest contributors to the balance in both the tax (as costs) and subsidy (as benefits) scenarios. Although utility euro’s and not financial euros, consumer surplus is to be considered in a SCBA according to the Dutch guidelines . Another weakness is that this study has only estimated effects on the food consumption side, and not the food production side. For the tax on meat-based products, increases in export following a lower domestic demand for meat products could offset some environmental gains in terms of national GHG emissions and may worsen the financial situation for some livestock farmers. If not implemented in Europe, Dutch consumers might also increase spending across border to avoid the higher prices. With the Danish fat tax, however, this effect was observed to be relatively small .
The attention for healthiness and sustainability of food consumption grows . Information like derived in this SCBA could prove crucial to accurately estimate long-term effects of new policies. To improve assessment of societal effects of price interventions, real-life assessment of price changes could prove highly informative in addition to price elasticities of demand. Virtual supermarkets such as those studied by Waterlander et al. [60, 61] can potentially increase knowledge about consumer behaviour following price changes, such as introduction of taxes and/or subsidies. Alternatively, discrete choice experiments (DCE) and/or willingness-to-pay (WTP) assessments could be used for studying healthier and more sustainable foods choices.
The presented results demonstrate that a reduction in chronic disease prevalence, from reductions in meat consumption or increase in F&V consumption, is leading to benefits to society following gains in quality of life, mortality, healthcare spending, and productivity. In terms of environmental impact, a reduction of 8.5 and 16% in the 15 and 30% tax scenario respectively but an increase of 4.6% in the subsidy scenario was estimated. Concluding, a 15% or 30% tax on meat or a 10% subsidy on F&V could lead to net welfare gains for the Dutch society.
Availability of data and materials
The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request. The DYNAMO-HIA model is freely available from https://www.dynamo-hia.eu/nl.
Discrete choice experiment
Dutch National Food Consumption Survey
Dynamic Modelling for Health Impact Analysis
Fruit and vegetables
High Environmental Costs-Low Efficiency Gains
Life Cycle Analysis
Life Cycle Inventories
Low Environmental Costs-High Efficiency Gains
Quality Adjusted Life Year
Social cost-benefit analysis
Social economic status
Value added tax
Willingness to pay
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We want to thank prof.dr. Johan Polder, dr.ir. Ardine de Wit, dr.ir. Talitha Feenstra, and dr.ir. Arianne de Blaeij of the Dutch National Institute for Public Health and the Environment (RIVM) for their feedback on this manuscript prior to submission.
This project was funded by a research grant from the Strategic Program of the RIVM. Project code: S133006. The funding source was not involved in the study design, in the collection, analysis, and interpretation of data.
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Broeks, M.J., Biesbroek, S., Over, E.A.B. et al. A social cost-benefit analysis of meat taxation and a fruit and vegetables subsidy for a healthy and sustainable food consumption in the Netherlands. BMC Public Health 20, 643 (2020). https://doi.org/10.1186/s12889-020-08590-z
- Social Cost-Benefit Analysis, meat tax, fruit and vegetables subsidy, modelling, Netherlands, policy
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Growth Trends for Related Jobs
International relations is an interdisciplinary field of study that combines politics, economics, history and sociology, immersing students in the world of geopolitical issues. Students who major in international relations often dream of careers as diplomats, intelligence analysts or foreign affairs officers. Others apply their education and knowledge toward careers in international business. Recipients of a degree in international relations can look forward to an interesting career with a competitive salary. Career path, level of education, experience and other skills will influence specific salary figures.
The Wall Street Journal reported in 2008 average starting and mid-career salaries for degree holders in a wide range of academic majors. The figures reported by the newspaper were based on a national survey of bachelor’s degree recipients. International relations majors earned an average starting salary of $40,900 a year. Compared to other social sciences, international relations majors had higher starting salaries than students who majored in psychology, sociology and anthropology. They earned less than economics majors, who averaged more than $50,000 a year, and about the same as political science majors, who averaged $40,800 a year.
Men and women with international relations degrees can expect to see their earnings increase as they grow in their careers and garner more experience and knowledge. The Wall Street Journal reported that international relations majors had average mid-career salaries of $80,900 a year. Compared to other academic disciplines, international relations majors’ earnings continued to trail those of students who majored in economics and engineering fields, but exceeded those earned by majors in many humanities and social science fields, including history, sociology, English, psychology and political science.
The U.S. government is one of the most significant employers of men and women with international relations degrees. Federal departments such as the departments of State, Commerce, Defense and Homeland Security employ international relations majors as foreign affairs officials, intelligence and foreign affairs analysts. According to Making the Difference, a website jointly operated by the Partnership for Public Service and the U.S. government’s Office of Personnel Management, an intelligence officer with the Department of Defense can earn between $38,000 and $76,000 a year, while a foreign affairs officer can earn between $80,000 and $116,000 a year.
The federal government’s General Service (GS) salary schedule determines salary levels for most federal jobs. Education is one factor influencing a starting salary with a federal agency. For an international relations job, a master’s degree enables a person to start at a higher GS level, earning a higher starting salary than a bachelor’s degree recipient.
Shane Hall is a writer and research analyst with more than 20 years of experience. His work has appeared in "Brookings Papers on Education Policy," "Population and Development" and various Texas newspapers. Hall has a Doctor of Philosophy in political economy and is a former college instructor of economics and political science.
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We don’t have much time until the United States runs up against the federal debt ceiling.
Here are a few related resources that might be useful (you might also be interested in The Best Resources To Help Understand The Federal Government Shutdown):
What’s up with the debt ceiling? is a CNN slideshow.
A recent history of America’s debt ceiling, in one interactive graphic is from The Washington Post.
History lesson: Why did Congress create a national debt limit? is from The Washington Post.
Foreign Holdings Of U.S. Debt is a Washington Post infographic.
Republicans and Obama in debt crisis talks is a Breaking News English lesson.
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Recent data suggests that India’s
economic performance is consistent and IMF predicts a robust growth rate of 7.4
% for India’s economy in 2017. There are many long term changes such as
urbanization, the ever increasing middle class and the spending capacity of the
people powering it’s competitiveness and in turn the consistent economic
success. Citizens have better access to employment, education, health, and so
Due to urbanization a huge
consumer base is formed which is a good indication for both global and local
The infrastructure also got a
boost as a result of urbanization. Again this is an opportunity for both
private companies as well as government. There will be need of more housing,
transportation, education & health institutions and utility services like
power, drinking water, sanitation and so on. State may compete with each other
provide better infrastructure to attract companies and tap resources.
But what makes it more
sustainable is recent government initiatives and technological advancements. If
the most significant and powerful changes to be listed the recent
implementation of goods and service tax (GST) will be the numero uno. Now India’s
29 states will be really a unified market. Earlier all the states had different
tax structures for different goods.
states are very developed in India and why can’t industries come up in economically
underdeveloped states? The problem is – lack of infrastructure. Governments in underdeveloped
states cannot provide basic facilities such as electricity and water. This is
because these states are not rich. Why are these states not rich? Tax
collections are highest in manufacturing states. GST being consumption based
tax, tax collection will go to the states in which the goods are consumed, and
not where they are manufactured. This will give all the state the opportunities
to be competitive and opportunity to economically perform.
manufacturing was scattered across the country based on where you got
advantageous tax breaks. It was not economically the best place to manufacture
and supply something. There were quite hilarious consequences where,
essentially, shipment of goods—let’s say 400 kilometers hinterland into India
to the port—was more expensive than taking a container from that port to
Brazil. That is the kind of complexity that India’s logistics networks, enabled
by local state taxes, was creating.
With the GST also india sees
major changes in direct taxes. In the recent years Income Tax rates and review
mechanisms reformed. The government is trying to include larger population, keep
rate low, simple and transparent. Besides raising revenues, it is required to
incentivise savings, promote exports, achieve balanced regional development,
promote investments in infrastructure, expand employment, promote scientific
research and development.
Government’s push for financial
inclusion now showing the effective difference.
A large-scale independent national
survey shows 99 percent of households have at least one member with a bank
account (Bhattacharya 2016). Financial inclusion is linked to a country’s
economic and social development, and plays a role in growth and employment. Due
to financial inclusion bot the government and people truly involved in economy.
A push for gentle prominence:
Recently India came in lime light
when it successfully launched 104 satellites in the space and successful mars
mission in its very first trial. India’s greatest asset has been its ability to
manage lower-cost launch vehicles and success rate. The demand for small and
inexpensive satellites is thought to dramatically increase, putting India in an
extremely advantageous position compared to its foreign counterparts, who focus
mainly on larger satellites. India’s space agency is planning a second mission
Now Indian economy is not only
accounted for FDI in India but also outbound investments from India to other
countries. In 2015 UK announced that India is the third largest source of FDI
for them as investments increased by 65 % and 9,000 jobs secured.
Now India is making its presence
globally and taking necessary steps. Major Outbound investment is the clear
indication that India has entered in the global marketplace and proves its
competitiveness. As per McKinsey & Co., the Indian economy is expected to
increase its revenue from information-technology, agriculture, pharmaceuticals,
infrastructure and FMCG to US$ 160 billion by 2025.
The Indian media &
entertainment sector is expected to grow at a Compound Annual Growth Rate
(CAGR) of 13.9 per cent, to reach US$ 37.55 billion by 2021 from US$ 19.59
billion in 2016, outshining the global average of 4.2 per cent.
The international outreach and
demand of films is expanding. A recent Bollywood film “Dangal” broke box office
records in China for a non-Hollywood movie.
India has shown its regional
economic leadership to neighbouring countries with substantial investment,
infrastructure improvement and strategic trade alliance. The development of Chabahar
Port in Iran which could give opportunity to Indian companies to potentially
invest over US $16 billion in Chabahar Special Economic zone. It’ll also extend
India’s commercial outreach to Central Asia.
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by Thomas Chalaux, Economist, Macroeconomic Analysis Division, OECD Economics Department
There is a recurring controversy, as to the role of global demand pressures in driving domestic inflationary pressures, which matters because such an effect would undermine the control which domestic central banks have in achieving their inflation objectives. Economists from the Bank for International Settlements have presented evidence that global demand pressures, proxied by a measure of the global output gap, are important in explaining inflationary pressure in advanced economies (Borio and Filardo, 2007 and Jasova et al., 2018). On the other hand, other distinguished economists have failed to replicate this result, finding little or no influence of the global output gap on domestic inflation, once other more standard explanations, including domestic unemployment and imported inflation, have been accounted for (Ihrig et al., 2010; Calza, 2008; Gerlach, 2004; Pain et al., 2006; Yellen, 2017; Mikolajun and Lodge, 2016). This blogpost suggests a way in which these apparently contradictory findings can be reconciled and demonstrates that this explanation is borne out with surprising clarity when tested across all OECD economies (for more details see Turner et al., 2019).
The studies that have found important effects from global demand pressures have focused on headline measures of inflation, whereas most of the studies that find contrary results have been explaining ‘core’ inflation, where core inflation typically excludes energy and food prices because they can be very volatile. Global demand pressures might be expected to have stronger effects on energy, food and commodity prices that feed more directly and immediately into headline inflation than core inflation. A simple look at the correlation between the global output gap and aggregate OECD measures of core inflation and of the ‘wedge’ between headline and core inflation, tends to confirm this (Figure 1).
Similar results are found when looking at OECD countries individually: the choice between using the global or the domestic output gap is unclear when explaining headline inflation, while the domestic output gap is clearly favoured when explaining core inflation. Conversely, the global output gap is overwhelmingly preferred when explaining wedge inflation (Figure 2).
The strong relation found between global capacity measures and the wedge between headline and core inflation suggests policymakers should be wary of headline inflation picking up sharply when many countries overheat simultaneously. It might also raise questions as to the appropriate price index to target: if this wedge is strongly influenced by global, rather than domestic, conditions then targeting core might be more attractive than headline inflation because it relates more closely to domestic monetary policy. Moreover, the experience of recent decades suggests that the difference between headline and core inflation can be very persistent and should not be dismissed as short-term noise. On the other hand, excluding important components of the consumer basket from the official target is open to objections about the diminished relevance of a narrower policy objective, less closely related to living standards and so less relevant to agents in the wider economy.
Borio, C. E. V. and A. Filardo (2007), “Globalisation and Inflation: New Cross-Country Evidence on the Global Determinants of Domestic Inflation”, Bank of International Settlements Working Papers, No. 227.
Calza, A. (2008), ´Globalisation, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area, “European Central Bank Working Paper Series, No. 890.
Gerlach, S. (2004), “The Two Pillars of the European Central Bank”, Economic Policy, Vol. 72, No. 3, pp. 707-734.
Ihrig, J., S.B. Kamin, D. Lindner and J. Marquez (2010), “Some Simple Tests of the Globalisation and inflation Hypothesis”, International Finance, 13 (3), pp. 343-375.
Jasova, M., R. Moessner and E. Takáts (2018), “Domestic and Global Output Gaps as Inflation Drivers: What Does the Phillips Curve Tell?”, BIS Working Papers, No. 748, https://www.bis.org/publ/work748.htm.
Mikolajun, I. and D. Lodge (2016), “Advanced Economy Inflation: The Role of Global Factors”, ECB Working Papers, No. 1948, https://ssrn.com/abstract=2831946.
Pain, N., I. Koske and M. Sollie (2006), “Globalisation and Inflation in the OECD Economies”, OECD Economics Department Working Papers, No. 524, OECD Publishing, Paris, https://doi.org/10.1787/18151973.
Turner, D., T. Chalaux, Y. Guillemette and E. Rusticelli (2019), “Insights from OECD Phillips curve equations on recent inflation outcomes,” OECD Economics Department Working Papers 1579, OECD Publishing.
Yellen, J.L. (2017), “Inflation, Uncertainty and Monetary Policy”, remarks at “Prospects for Growth: Reassessing the Fundamentals”, 59th Annual Meeting of the National Association for Business Economics, Cleveland, Ohio, September.
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Microfinance, according to CGAP, is defined as financial services for poor and low-income clients. More broadly, microfinance refers to a movement that envisions a world in which low-income households have permanent access to a range of high quality and affordable financial services offered by a variety of retail providers to finance income-producing activities, build assets, stabilize consumption, and protect against risks.
Microfinance is making its way into core finance classes but has also sparked an increase in elective courses in business schools around the world that specifically focused on the topic. The Asian Institute of Management offers a course called Banking with the Poor that focuses on financial services for the poor, understanding the low-income market for financial systems and contemplating the future of microfinance. The University of Michigan College of Business and Kellogg School of Management, Northwestern University both offer microfinance courses that bring in a range of speakers working in microfinance to bring the ideas to life.
Some electives provide opportunities for hands on experience in the field. The University of Maryland Robert H. Smith School of Business has an elective called Doing Business in Bolivia, which includes meetings with microcredit agencies and foundations and investment funds in Washington, D.C. and San Francisco, allowing students to explore a range of approaches and meet funders in two very different contexts. Students then have the chance to ‘follow the money’, tracing the donations, loans and investments from their sources to the recipients in the field in Bolivia. Students enrolled in the microfinance elective at the University of Portland Pamplin School of Business Administration visit Nicaragua to see first-hand how different types of organisations are offering financial services to low-income citizens.
Fordham University’s international service learning program includes a Microfinance Consulting Project for which a group of students apply their business skills on sales, inventory, accounting and marketing of close to 100 products from artisan groups in developing countries, like Kenya.
The University of Denver Daniels College of Business has partnered with Deutsche Bank’s Global Commercial Microfinance Consortium for an elective in Social Entrepreneurship and Microfinance. Students have the chance to interact with the bank managers that oversee the fund and perform due diligence for loan requests from international microfinance institutions. Students spend their spring break visiting microfinance institutions in a developing country.
Another interesting approach is the one taken by the University of California, Berkeley Haas Business School. With faculty guidance, students created an elective around the topic of microfinance. For their final project, the class invests $25,000 in a portfolio of real world microfinance investment opportunities. Students are required to submit a 3-4 page investment plan detailing specific entities, amounts, and rationale. The investment is made based on the plurality of students’ recommendations. The Berkeley Microfinance course transmits over the web to other campuses across the country, including Cornell University Johnson School of Business and Thunderbird School of Global Management.
Learn more about: CGAP, Microfinance Gateway, ACCION and Grameen Bank. The Asian Development Bank Institute (ADBI), the World Bank Tokyo Development Learning Center (TDLC), and the United Nations Capital Development Fund (UNCDF) offers the Microfinance Training of Trainers (MFTOT) online course based upon the interactive microfinance distance learning course (MFDL) developed by UNCDF. Also, 2005 was the International Year of Microcredit, and the website provides a wealth of information.
Does your programme have a course on microfinance? Share your experiences in the discussion area below.
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Now, since we know what bitcoin is, its history, working, learning about its characteristics can’t be ignored. In this article, we are going to know about some of the characteristics of bitcoin which will help you wealth matrix.
The first and most crucial characteristic of bitcoin is its decentralization. There is no central power in bitcoin as there are in traditional currencies, which are issued and managed by a central authority, which can be the country’s government or any other organization. Bitcoin decentralization provides many advantages over traditional currency like no vulnerability to seizure, tax, thievery, etc. You can read our article “How decentralization of bitcoin ensures advantage over traditional currencies?” for more detailed information.
It is well known to us that how much bitcoin does a person owns can’t be known, but at the same time, it is visible to everyone on the ledger board that how much transaction has been made by which user and who is/ are the receiver/receivers of the bitcoins. So, its transaction is crystal clear to everyone in the ecosystem of bitcoin. And from this mentioned history on the ledger board, on a proper analysis, the asset owned by any person can be easily known if one wants to. But many things can be done to prevent this too.
Now, we don’t need to tell you repeatedly that the user of bitcoin remains anonymous, and there is no chance of tracking back to the user. No requirement of any legal paper helps in the identification of the person. And this is also the reason that no government can even know who is behind a particular account. At the same time, when you make an account in the bank or make transactions through the bank, they will demand address, phone number, legal papers, and on transactions, they will have a good history of date, time, amount, receiver and every other single detail.
As compared to other banks or any other method of transaction, bitcoin is faster. Sending money from one side of the world to another side of the world is a matter of just a few minutes if sent in the form of bitcoin. Simultaneously, if the same amount is sent through any other bank or method, it will take approximately a week or more.
What comes under this characteristic is if bitcoin is transacted once, there is no getting back unless the receiver is willing to do so. It means there is no going back; the receiver can’t claim that he never received any bitcoin.
Bitcoins are not physically present in the form of notes or coins, unlike traditional money. And in this way, it is easy to carry in the phone. It is tough to be stolen by thieves in the market or from the house.
Simple to set up
Generally, banks take long documentation and procedures for in opening an account and managing it, including dealer records, credit checks, even they need many legal papers for identification of the user, but at the same time, you can make an address in bitcoin in a few seconds, without any need of any legal documents, you need to set a strong password and must not forget that password because once that password is gone. There is no getting it back.
Value is determined by demand
There is no fixed value or price of bitcoin. For its value and price, it entirely depends on its demand. The members of the ecosystem of bitcoin determine the cost and value of bitcoin in the market.
Commission of own choice
Whether you want to give some transaction fee or not is entirely according to your choice. The only difference is that if you pay transaction fees, you will be provided with some additional facility whose absence won’t harm non-fees paying users in any way. It is entirely voluntary.
These are some of the characteristics of bitcoin, which makes it different from the traditional currency.
Other than these characteristics, some other characteristics are similar to money, which makes bitcoin function as money. Such characteristics are portability, durability, fungibility, recognizability, durability, recognizability, divisibility, acceptability, uniformity, limited supply.
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In this online lesson, students will cover some key evaluation points for fiscal policy, including the Laffer curve and the Phillips curve, amongst other aspects.
WHAT YOU'LL STUDY IN THIS ONLINE LESSON
Additional teacher guidance is provided at the end of this online lesson.
HOW TO USE THIS ONLINE LESSON
Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding and application of fiscal policy. Others are based on short videos, including activities for you to think about and try at home.
If you would like to download a simple PDF worksheet to accompany the video activities, you can download it here: Evaluating Fiscal Policy. You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.
ACTIVITY 1: VIDEO - FISCAL POLICY KEY TERMS REMINDER
In this video, we'll work through a simple game to remind you of some of the key terms associated with fiscal policy. You will need to feel confident with these key terms ahead of moving through the rest of this online lesson.
ACTIVITY 2: INTERACTIVE GAME - COMPARING GOVERNMENT SPENDING
A key aspect of being able to evaluate well in your exam is the ability to use real-life examples and evidence to either support or argue against your points. In this Higher or Lower activity, you can compare the levels of government spending between different countries.
ACTIVITY 3: VIDEO - THE LAFFER CURVE
The Laffer curve and its policy implications underpinned much of the economic policy in the 1970s and 1980s in both the UK and the US, which aimed to reduce the rates of tax on high earners. This video explores the nature of the Laffer curve as well as providing some key evaluation points regarding its usefulness.
ACTIVITY 4: WIDER READING ON THE LAFFER CURVE
Take at the articles below, looking at the application of the Laffer curve principles to modern policy making:
Polly Toynbee in The Guardian, writing in July 2019
A perspective on US Congresswoman Alexandria Ocasio-Cortez's wealth tax proposal, in The Guardian, from January 2019
If you want a really challenging read, perhaps if you are considering economics at university, then try this report from the Brookings Institute.
ACTIVITY 5: INTERACTIVE GAME - APPLICATION OF THE LAFFER CURVE
This interactive game makes use of some remarkable data generated by the economist Jacob Lundberg from Uppsala University, in which the current rate of marginal tax on high earners is compared with the estimated Optimal Tax Rate for different countries. How will you get on?
ACTIVITY 6: VIDEO - TRADE OFFS AND THE (SHORT RUN) PHILLIPS CURVE
In this video, we explore the meaning of "trade-offs" in macroeconomic policy, and look at the impact of rising growth (due to expansionary fiscal policy) on other macro objectives. We then take a closer look at an important trade-off - inflation and unemployment - using the short-run Phillips curve.
ACTIVITY 7: INTERACTIVE GAME - REVIEWING THE MULTIPLIER
In this short quiz, you can have a go at 5 calculation questions relating to the multiplier - get your calculator ready! You will need to have a good understanding of the multiplier to help you with Activity 9.
ACTIVITY 8: EXAM SKILLS
Download this example essay, which considers whether the UK tax system should become more progressive. You should:
In activity 9, there is an exam-style written task in which you can use your knowledge of exam technique developed in this activity.
ACTIVITY 9: VIDEO - CROWDING OUT
In this video, we explore the meaning of crowding out and start to take a look at some of the differences between the Keynesian perspective on fiscal policy and the Neoclassical perspective on fiscal policy. Using these different perspectives can be a great way to introduce evaluation in exam answers on fiscal policy. At the end of this video, there is an exam-style task in which you need to write an essay: ask your teacher to let you know how many marks are available for the essay.
ACTIVITY 10: INTERACTIVE GAME - GLOBAL CORPORATION TAX RATES
As we noted in Activity 2, one way to evaluate in exams is by using real-world data and evidence to either support or argue against your points. In this game, you can compare different rates of corporation tax across the world.
ACTIVITY 11: VIDEO - DISCRETIONARY AND AUTOMATIC FISCAL POLICY
In this short video, we take a look at the difference between discretionary and automatic fiscal policy, along with some practical application. Find out why governments may say that they intend to have a "balanced budget" over the course of the economic cycle.
ACTIVITY 12: VIDEO - AUSTERITY
Here, we take a practical look at how the UK government responded with fiscal policy in the aftermath of the Global Financial Crisis.
ACTIVITY 13: TEST YOURSELF!
Here are 15 multiple-choice questions testing some of the key concepts covered throughout the online lesson on fiscal policy. Why not send your teacher a screenshot of your score?
ACTIVITY 14: ENRICHMENT TASK 1 - BE THE PRESIDENT
In this task, you adopt the role of the US President, 100 days into the Presidency in 2017. You need to decide on your fiscal policy. You can download the data sheet here.
ACTIVITY 15: ENRICHMENT TASK 2 - THE GOVERNMENT GAME
Here is a fantastic interactive game that you can play with your classmates, even though you may all be studying at home! You and your teachers can access the game here.
If you want to read more about how the Phillips curve has been used, critiqued, and changed over time, here is a good starting point. You can easily extend your own knowledge on this topic by carrying out your own research online. Perhaps you can find an innovative way to present the story of the Phillips curve - we would love to see some cartoon stories!
ADDITIONAL TEACHER GUIDANCE
This online lesson includes:
We suggest allowing 90 minutes for the main activities, an additional 15 to 30 minutes for the exam-style written task, and around 1 hour for the enrichment / extension tasks (although these could take longer depending on the level of student engagement)
© 2021 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.
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Ground source heat pump (GSHP) systems are significantly more energy efficient than conventional heating and cooling systems, but they have suffered from low market penetration. This study analyzes the implications of and barriers to nation-wide GSHP retrofits in U.S. single-family houses based on national databases of housing units and home energy use. Our model estimates maximum annual savings of 1.26 quads (1.33 EJ) of energy, $7.1 billion in energy costs, and abatement of 64.8 million tons of CO2eq. Economics is the major barrier as typical GSHPs cost $164 less to operate annually but cost $8990 more to install than the conventional alternative HVAC systems. Spatial and economic constraints exclude 7.7% and 89% of homes respectively, leaving only 10% of homes suitable for retrofit. Applying these two constraints, savings reduce to 0.15 quads (0.16 EJ), $3.0 billion in energy costs, and abatement of 12.1 million tons of CO2eq. A 30% federal tax credit helps increase the percentage of GSHP-suitable homes from 10% to 30% while reducing the average payback period from 9.1 to 4.8 years among those homes. More effective policies to lower high cost premiums would be needed to promote large-scale GSHP implementations.
CSS Publication Number:
Energy and Buildings
15 September 2016
Lim, Tae Hwan, Robert D. De Kleine and Gregory A. Keoleian. (2016) “Energy Use and Carbon Reduction Potentials from Residential Ground Source Heat Pumps Considering Spatial and Economic Barriers.” Energy and Buildings 128: 287-304
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How Rapidly Rising Energy Costs Could Harm State Economy and Climate Programs
California’s electricity rates are already 60% higher than the rest of the U.S. and rising five-times faster. In just the last seven years rates have risen nearly 30%.
PG&E’s rates could exceed 27¢ per kilowatt hour by 2020 based on pending rate increases, not including any liability costs. That is more than 2½ times the national average.
California’s rates will rise even further due to a number of factors, including:
- Short-term wildfire mitigation plans
- System hardening to reduce long-term wildfire threats
- Continued expansion of renewable energy and other clean technologies
- Massive utility liability from 2017 and 2018 wildfires
- Expansion of electric vehicle charging infrastructure
- Increasing utility profits
- Ongoing wildfire risk
Policymakers Must Hold PG&E Accountable
Time for Real Reform
All total, rates are likely to rise substantially and could more than double in just the next few years, increasing costs for California ratepayers by tens of billions of dollars annually.
These rapid increases in electricity rates are creating a “tipping point” where California’s
ratepayers and economy will be irreparably damaged if they continue. Higher
energy costs would place California businesses at a significant disadvantage
when competing with out-of-state businesses. Rapidly rising rates will also
negatively impact California’s climate policies, including efforts to maintain
progress in electrifying the transportation sector. Dramatically higher rates
would also make any building electrification transition harder, sacrificing
greenhouse gas reductions.
Consider the following:
- PG&E expects to spend approximately $7.8 billion on wildfire mitigation activities through 2023 as part of an overall $21 billion “system hardening” plan.
- PG&E alone is facing an estimated $30 billion in liability related to the wildfires that occurred in just the last two years.
- SCE is facing up to $10 billion in wildfire related liability costs.
- Edison’s rate base is expected to grow by $8.5 billion from 2017 to 2020, an annual increase of nearly 10%.
- SDG&E rates, which are already the highest in the state, are expected to grow by an additional 18.3% over the next two years.
- PG&E, SCE & SDG&E have requested outrageous increases in shareholder profits (over 16% return on equity) that will cost ratepayers billions of dollars annually.
All Total – Tens of Billions of Dollars in Ratepayer Impacts
The Massive Cost of the “New Normal” in Wildfires and Climate Change Era
Source PG&E Corp: California Energy Markets
Utility Dive
Sacramento Bee
Los Angeles Times
California Energy Markets
AECA analysis of approved & pending rate increases
CPUC filings
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The answer can be processed by the calculations involved and that are: ARM 2000 / 10,000 km x 250 km 000/10000 x 250 = 50 50. Now according to the calculations it takes ARM 50 in total to travel from a car rather than spending ARM 100 for the bus fare to Thailand. From this point we asses that taking a bus for the trip is our Opportunity Cost, that we choose what is best and give up the alternative choice for the decision taken.
According to part B in the following question, if we include the hassle and stress of driving and an average one traffic ticket for ARM 20 and ARM 28 respectively for every 200 miles we drive our decision will still be the same and we will definitely give up he choice for taking the bus as per the calculation following: We let go the hassle of driving which adds up to ARM 20 as per the rule of Opportunity Cost and we focus on the remaining value of ARM 28 which is for the traffic ticket. The calculation is: 1 km ? 0. 62 miles, 250 km = 155 miles. So for every 200 miles we drive, ARM 28/ 200 miles x 155 miles 28/ 200 x 155 =21. = ARM 21. 7 Including the amount for the hassle of driving, ARM 21. 7 + ARM ARM 41. 7 From this we get to know that for every 200 miles we drive we have to add an extra amount of ARM 41. 7. This amount leads us to the summing up for both the answers of art A and part S: ARM 50+ ARM 41. 7 50+41. 7 91. 7. This final amount again states that taking a car is still cheaper whilst traveling by the bus giving up a fare of ARM 100. The total difference in the both values is of ARM 8. 3 stating then again that taking the car for the trip is much more economical and cheap.
QUESTION – 2 In the following situation, if a scientific report is issued stating that mercury is being found in the fish which is toxic to humans and may cause problems to health so this would definitely affect the fresh sea food market for the demand and supply. The law of demand states that “There is an inverse relationship between price and quantity demanded”. There are 5 non-price factors influencing that influence demand that are I. Prices of goods related in consumption ( Complimentary and Substitute) it. Income ( Normal and Inferior) iii. Future expectations ‘v.
Taste and preferences In this situation we generally talk about Taste and preferences as when mercury found in fish is found toxic to humans, this ultimately reduces the demand for the fish and hence shifting the demand curve to the left and displaying the significant decrease in the graph. Looking at the graph attached (Pl. Turn over for the display of graph). The graph states that there is a decrease in the price of the fish as the demand decreases and also a decrease in the quantity of the fish demand, so in other forms there is a decrease from POP to Pl and also a decrease from QUO to IQ . ) In the current situation the question now states that if we see a drastic fall in the price of diesel fuel which is used to operate the fishing boats used for fishing purposes, we will also see an affect in the market for supply. The law of supply states that “There is a direct relationship that exists between the rice and quantity demanded in a given time period (sisters Paramus)” In the supply market there are basically two factors that we focus upon and they are: l. The price of resources II. Technology and productivity. Sell fuel and gasoline which is mainly used by the fishermen to operate the fishing boats in order to catch the fish falls down or decreases significantly so in this situation, according to the law of supply and demand this in turn will increase the supply of fishes being sold as more producers or fishermen will tend to fish more and thus will have a large amount of fish to sell for the people demanding it hence increasing the supply of the fish in the fresh seafood market. Looking at the graph attached (Pl. Turn over to refer to the graph).
The graph indicates that there would be an increase in the quantity from QUO to IQ and for the price it will decrease from the new price to the original price or in other forms it will increase in the same way from POP to Pl . Now looking at this question, Soya beans are often used as one of the main ingredients for the feed of cattle. The question states that, if a price support program supports the price for Soya beans used for the cattle feed this would ultimately affect he market for the supply and demand for beef.
In economics, a price support may be either a subsidy or a price control, both with the intended effect of keeping the market price of a good higher than the competitive equilibrium level. In the case of a price control, a price support is the minimum legal price a seller may charge, typically placed above equilibrium. It is the support of certain price levels at or above market values by the government. A price support scheme can also be an agreement set in order by the government, where the government agrees to purchase the surplus of at minimum price.
For example, if a price floor were set in place for agricultural wheat commodities, the government would be forced to purchase the resulting surplus from the wheat farmers (thereby subsidizing the farmers) and store or otherwise dispose of it. In this situation we are talking about how the price support program in this situation will affect the market equilibrium, price or quantity. Looking at how the government acts on the ingredients of cattle feed so hereby the program reduces the price of Soya bean and thus increasing the demand for Soya bean for feeding the Attlee hence increasing the supply for beef in the market for beef.
Looking at the graph for the following question we can see that there would be an increase in the quantity from QUO to IQ and on the other hand we see a decrease in the price from Pl QUESTION – 3 In the current question situation we are asked to find the average, variable, marginal and average total cost from the given terms: Average Product = 50 Marginal Product = 75 Wage Rate = 80 Fixed Input = 500 Total Variable Cost / Quantity TV/Q 80/50 = 1. 6 Marginal Cost Total Difference of Costs / Total difference of quantity 80 75 = 1. 6 Average Total Cost Average fixed Cost + Average variable cost We need to find the Average Fixed Cost first as A. P=50 so, 50=T. P/L 50=T. P/50 -r. P=sox’s Hereby, A. F. C=500/XX = 0. 2 A. F. C + A. V. C 0. 2+1. 6 = 1. 8 Please turn over for the display of graph. Short-run average cost will vary in relation to the quantity produced unless fixed costs are zero and variable costs constant. A cost curve can be plotted, with cost on the y-axis and quantity on the x-axis.
A typical average cost curve will have a U-shape, because fixed costs are all incurred before any production takes place and marginal sots are typically increasing, because of diminishing marginal productivity. In this “typical” case, for low levels of production marginal costs are below average costs, so average costs are decreasing as quantity increases. An increasing marginal cost curve will intersect a U-shaped average cost curve at its minimum, after which point the average cost curve begins to slope upward.
In economics and finance, marginal cost is the change in the total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. [l] In general terms, marginal cost at each level of reduction includes any additional costs required to produce the next unit. For marginal cost of the extra vehicles includes the cost of the new factory. In practice, this analysis is segregated into short and long-run cases, so that over the longest run, all costs become marginal.
At each level of production and time period being considered, marginal costs include all costs that vary with the level of production, whereas other costs that do not vary with production and are considered fixed. QUESTION ? 4 In microeconomics, Economies of scale are the cost advantages that enterprises obtain due to size, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well.
Economies of scale apply to a variety of organizational and business situations and at various levels, such as a business or manufacturing unit, plant or an entire enterprise. For example, a large manufacturing facility would be expected to have a lower cost per unit of output than a smaller facility, all other factors being equal, hill a company with many facilities should have a cost advantage over a competitor with fewer. Discomposes of scale are the forces that cause larger firms and governments to produce goods and services at increased per-unit costs.
The concept is the opposite of economies of scale. Discomposes of scale in a firm might be caused by: Control – monitoring the productivity and the quality of output from thousands of employees in big corporations is imperfect and costly. Co-operation – workers in large firms may feel a sense of alienation and subsequent loss of morale. If they do not consider themselves to be an integral part of the business, their productivity may fall leading to wastage of factor inputs and higher costs.
A fall in productivity means that workers may be less productively efficient in larger firms. Loss of control over costs – big businesses may lose control over fixed costs such as risk that very expensive capital projects involving new technology may prove ineffective and leave the business with too much under-utilized capital. For the following statement that appeared in a wall street Journal in the year of 2000 guarding the huge fixed costs involved in developing new vehicles and automobiles and in which auto makers felt compelled to maintain or expand market share.
The auto makers if lost their shares and in the coming long term could affect in the shutting down of factories, or running the factories at unprofitable rates. This statement supports the Discomposes of scale as it involves a huge amount of fixed costs for the development of new vehicles and automobiles. As mentioned above, discomposes of scale may occur if larger firms and governments produce goods and services at increased per-unit costs. Similarly the firm had been producing the icicles and automobiles at huge fixed costs which would later cause the company to shut down or either demonstrating the discomposes of scale.
The economies of scale do not benefit a company or a firm if its output level is small or it involves a huge amount of fixed costs in the LIRA. By taking advantage of the opportunities that come from larger size and increased output, companies can reduce their average unit costs, and increase their profits. They can also create many internal opportunities simply by growing. And sometimes the external environment also provides economies of scale, based on things like industry size or geographic location.
Organizations must be careful about outgrowing their economies of scale and getting too big. Average unit costs usually decrease with increased output, but only to a certain point. After that, costs may begin to rise again as the company creates unwanted inefficiencies. These ‘discomposes’ of scale can also result from external events, so an organization should continuously monitor its size and growth to seek its optimal level of efficiency. (2,312 Words in total) www. Investigated. Com www. Wisped. Com wry. Tutor. Com www. Schlep. Com
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Green Procurement Policy
A green procurement or green purchasing policy (GPP) is put in place to guide businesses when acquiring materials, supplies and services and selecting such products based on their impact on the environment and human health. GPPs can apply to both products bought to run the business internally (Ex. office supplies and equipment) as well as for producing the goods and services of the business itself (Ex. materials used in business products).
Green purchases are those that have a low environmental impact and are more sustainable in terms of the materials they’re made from and the sourcing and manufacturing practices that make them. Green procurement also considers the immediate and future impacts of purchases through their consumption and eventual end-of-life stage. Green procurement policies embody the triple bottom line (TBL), a business framework for improving performance in all three areas – environmental, social, and financial.
Green Procurement Benefits
Resource and Operational Efficiency
Buying sustainable products and purchasing from green suppliers and vendors promotes resource efficiency. Often GPPs instruct businesses to purchase products that consume less resources such as energy efficient light bulbs or low-flow faucets. Further, purchasing from a supplier who offers products with eco-friendly packaging or no packaging at all reduces your waste stream. These improvements in efficiency translate into cost savings for your business and resource conservation at large which is a win all the way around.
Having a GPP in place also improves operational efficiency as it provides your team with clear guidance on which green products to look for across all areas of your business. Providing detailed information on your GPP requirements and product standards makes it easy for your business to make credible green purchases quickly and confidently.
Improved Employee Health and Safety
Green procurement also serves your employees health, safety and overall well being. For example, buying certified eco-friendly cleaners to use in your workplace avoids the caustic and often toxic chemicals used in many conventional store-bought products.
The food items you provide in the break room vending machine can also be included in your GPP. Buying locally-made, organic and sustainable food options are usually healthier and can make your employees feel better and be more productive.
Launching a GPP will keep employees aware of both the sustainable products and habits they should be using but also the company’s larger sustainability mission. Raising employee awareness of and engagement in green purchasing can help build a green work culture and inspire employees to adopt such practices into their personal lives.
Procuring sustainably means evaluating your current products and practices in an innovative way. Sometimes choosing the eco-friendly option for products and suppliers may require you to rethink and redesign the way you operate. These brands are manufacturing their shoes from recycled and biodegradable materials and sourcing sustainably while still achieving the durability and comfort that shoe lovers expect.
As a best practice, invite all ideas to the table from across all levels and departments in your business and be open to new ways of greening your products, practices, and habits. You never know what creative solutions you may come up with.
Green Market Support
Continuing to buy truly eco-friendly products and support other sustainable businesses helps build the green market that is taking hold in economies worldwide. There are more eco-friendly products on the market today than ever before. However, having a GPP in place can help your team choose only the products that meet high standards and certifications thus combatting the rampant greenwashing that exists today.
A GPP can help you adhere to corporate regulations and avoid the risk of malpractice from using harmful products or partnering with unethical providers. You will also maintain public trust and avoid lawsuits and legal action. Such was the case for these chocolate industry giants that now face child labor allegations.
Improved Public Image
Abiding by a green procurement policy looks good in the public sphere in which more customers are preferring businesses that are socially responsible and good environmental stewards. Having a GPP allows you to be transparent with your customers, employees and other stakeholders on the products you buy, the providers you support and your purchasing habits. Launching a GPP is another way to reflect your commitment to sustainability and the well being of communities and the environment.
Green procurement can drive higher profits in various ways. Along with the customer attraction and loyalty that comes from having a greener reputation, green purchasing yields cost savings in the form of energy efficiency and reduced waste. While some green products can be more expensive, many are associated with rebate programs such as those offered by ENERGY STAR. As mentioned before, a GPP simplifies the green purchasing process. The time originally spent navigating a market overwhelmed with so many product options can now be used towards other important areas of your business.
Green Procurement in the Public Sector
The entities who most notably use green procurement policies reside in the public sector – universities, government agencies, and other public institutions. Many institutional GPPs are built upon larger federal policies. For example, the U.S. Department of Agriculture (USDA) developed their Green Purchasing Affirmative Procurement Program (GPAPP) from legislation such as the Energy Policy Act, the Resource Conservation and Recovery Act, and the Farm Security and Rural Investment Act.
Green Procurement in the Private Sector
Establishing and enforcing sustainability standards across the entire private sector can be difficult as the sector includes a vast variety of businesses, non-profits and NGOs. Businesses wanting to develop a GPP can use the Voluntary Sustainability Standards (VSS) concept developed by the U.N. Forum on Sustainability Standards (UNFSS). VSS are stakeholder-derived rules and guidelines for developing and implementing sustainable policies and practices.
The buying of goods and services can account for 50% or more of a company’s expenses. Therefore, the adoption of a GPP alone can have a major impact on your business and its position as a sustainability leader. GPPs can also lead to partnerships that benefit and improve the image of all companies involved. Johnson & Johnson, a multinational holding company, has a sustainable procurement program that promises to not only ensure compliance of social and environmental standards from their suppliers but also dedicate resources to engage with their partners and support them on their journey towards sustainability. As you design your GPP, reflect on your current suppliers and offer to share your sustainable business strategies with them. This could require or inspire them to adopt some of the same policies into their own operations.
What a Green Procurement Policy Should Include
This includes the reasoning behind the new policy and an outline of the goals and strategies it entails. Also include your sustainability mission statement and explain how the policy coincides with the company’s short and long-term sustainability goals. Displaying upper management support for the policy and perhaps personal remarks from these individuals will add to the credibility of your green procurement policy.
Table of Contents
The table of contents should be broken down into easy-to-navigate categories either organized by business area (Ex. Transportation) or green initiative (Ex. Energy efficiency).
- Plates, cups and cutlery
- Cleaning Equipment
- Lawn care
- Pesticides and fertilizers
Here’s an example of a real green purchasing policy from Babson College in Massachusetts.
Green Procurement Policy Principles
- Understand the impact your business purchases have on your community, the environment, and your profits.
- Commit to developing a plan of action to address negative externalities and find solutions.
- Measure and track GPP progress and its effects at all parts of the value chain.
- Be transparent with your stakeholders on the motives, goals, and strategies behind your GPP.
- Source locally from credible and certified businesses
- Choose certified eco-friendly products made from 100% biodegradable, compostable, or post-consumer content and those that do not include caustic or toxic chemicals. Note: When buying biodegradable products, ensure that there is a facility that can collect these items as biodegradable materials require special processing.
- Choose ethical products that support quality working conditions, worker health and safety, and community prosperity. Look for fair trade labels and other ethical certifications.
- Avoid plastic products whenever possible as many plastics are non-recyclable and can break down into microplastics that threaten wildlife and human health.
- Choose efficient products that conserve natural resources and limit waste.
- Think ahead and have a plan for how to manage the disposal of products.
A green procurement policy is a powerful tool for ensuring your business makes purchasing decisions that are environmentally sound and socially responsible. While procurement policies surrounding sustainability have traditionally only existed for public institutions, the private sector is beginning to implement GPPs and address the growing demand for greener businesses.
GPPs bring a wealth of benefits such as resource and operational efficiency, improved employee health and safety, risk mitigation, enhanced company image, and increased profitability. With the combined efforts from the public and private sectors, green procurement can become a normative practice and support the growth of green markets and economies worldwide.
About the Author
Natalie Sheffey Soto
GBB Green Ambassador
Natalie Sheffey Soto is a content writer for the Green Business Bureau. Growing up in the Appalachian Mountains, she developed a love for the natural environment and has committed herself to a career working to protect it. She is currently pursuing a Master’s in Global Sustainability with a concentration in Sustainable Business at the University of South Florida. Along with her outdoor enthusiasm, Natalie loves to play sports and foster animals for local rescues.
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Question: What are the responsibilities of a financial analyst professional?
Answer: A financial analyst may be responsible for a business unit or a specific geographical area, sector or industry. Financial analysts prepare analysis to help business decisions let it be an investment, merger or acquisition. They assess companies, securities, economies. They study the financial statements and perform various analysis using statistical software and spreadsheets.
Improve Your Financial Analyst Resume If you want to complete a self-paced financial analyst training course or certification please take a few minutes to review our financial analyst certification program called the Financial Analyst Specialist Certification (FASC) and it is offered on the BusinessTraining.com platform by the G.T.C. Institute, LLC.
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By Rep. Susan Davis | District 53 Dispatch
It certainly did not take long for internet service providers (ISP) to take advantage of the end of net neutrality. New research from Northeastern University and the University of Massachusetts Amherst shows that telecom companies are slowing internet access to and from popular online applications.
Apps for YouTube, Netflix and Amazon’s Prime Video have all experienced slowdowns in data speeds. Unless we restore net neutrality, the future could hold even more changes that restrict consumers’ access to the internet.
Congress needs to step up and pass legislation to protect consumers and restore net neutrality. I have joined my colleagues to make this happen.
What actually is net neutrality? It was a policy created under President Barack Obama to ensure all Americans have free and unfettered access to the internet. It means that providers cannot slow data speeds to certain apps or websites, and that providers cannot charge extra to access certain sites.
In June, the Federal Communications Commission (FCC) under the Trump administration overturned the Obama policy and put an end to net neutrality.
With slower internet speeds now a reality, what other changes could we see? For one, you could be charged to get faster online speeds.
Consumers could also be charged extra to use some apps and websites. This is a reality in other countries.
Imagine being charged an extra monthly fee — on top of what you’re already paying for the internet — to be able to use Twitter, Facebook, Instagram or Snapchat. Consumers could be charged more to access messaging, music and video services.
In Portugal, the country’s wireless carrier Meo offers separate packages for the kind of data and apps consumers use. There’s an extra charge for using social media, email, music or video apps and websites.
We could see internet services become similar to cable services for consumers. Most cable plans start with a basic package with just a few channels; if you want premium channels, that’s a whole different package and it’s going to cost a lot more.
Without net neutrality, the ability of ISPs to nickel-and-dime consumers is endless.
Worst-case scenarios could include ISPs blocking access to websites altogether. A provider could restrict access because the CEO doesn’t like the politics of a website or because it could be a competitor. This would severely limit the American people’s access to information or the ability to express their First Amendment rights.
What does this mean for small businesses? If you’re a business that uses technology or a website to reach and service your customers, equal access to the internet could be the difference between success or failure.
As the FCC was working to undo net neutrality, an effort in Congress was underway to preserve it. I joined with 168 of my colleagues to introduce legislation to overturn the FCC’s decision and restore net neutrality.
We didn’t stop there. We moved to force a vote in the House of Representatives through a rare parliamentarian procedure known as a discharge petition. If 218 members of the House sign the petition, House leadership must bring the bill up for a vote.
California is also leading the way to protect consumer access to the internet. The state legislature passed legislation similar to the net neutrality policy put in place by President Obama.
When California’s bill passed, the head of a telecommunications industry group responded to its passage: “The internet must be governed by a single, uniform and consistent national policy framework, not state-by-state piecemeal approaches.”
I agree. It should be a national policy and that national policy should be net neutrality. My constituents also agree; I surveyed them recently and 86 percent support net neutrality.
However, right now California is our best bet to reverse the misguided policies of the Trump administration. We’ve seen it on climate change and now on consumer protections as it relates to the internet.
The free flow of information is vital to a vibrant democracy — so much so that the framers of our constitution enshrined it in the First Amendment.
The internet has provided people with the unprecedented ability to communicate and access information. We have a responsibility to protect that access.
—Congresswoman Davis represents central San Diego, including the communities of Old Town, Kensington, Mission Hills, University Heights, Hillcrest, Bankers Hill, North Park, South Park, Talmadge, Normal Heights, as well as La Mesa, Lemon Grove, Spring Valley, Bonita, and parts of El Cajon and Chula Vista.
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How Crypto Currency Works – Just put, Cryptocurrency is digital money that can be used in location of traditional currency. The difference in between Cryptocurrency and Blockchains is that there is no centralization or journal system in location. In essence, Cryptocurrency is an open source protocol based on peer-to Peer transaction innovations that can be performed on a distributed computer network.
As an open source protocol, the procedure is highly versatile. This means that unlike Blockchains, there is a chance for the neighborhood at big to customize the core of the protocol to fit their needs. As such, a lot of innovation has actually occurred around the globe with the objective of supplying tools and methods that assist in wise contracts. Nevertheless, one particular method which the Ethereum Project is trying to resolve the problem of wise contracts is through the Foundation. The Ethereum Foundation was developed with the aim of establishing software solutions around smart contract performance. As such, the Foundation has launched its open source libraries under an open license.
For starters, the major difference between the Bitcoin Project and the Ethereum Project is that the previous does not have a governing board and therefore is open to factors from all walks of life. The Ethereum Project enjoys a much more regulated environment.
As for the projects underlying the Ethereum Platform, they are both making every effort to supply users with a new method to take part in the decentralized exchange. However, the major distinctions in between the 2 are that the Bitcoin procedure does not utilize the Proof Of Consensus (POC) procedure that the Ethereum Project uses. In addition, there will be a hard work to incorporate the newest Byzantium upgrade that will increase the scalability of the network. These 2 distinctions might show to be barriers to entry for prospective entrepreneurs, however they do represent important distinctions.
On the other hand, the Ethereum Project has actually taken an aggressive approach to scale the network while likewise taking on scalability concerns. In contrast to the Satoshi Roundtable, which focused on increasing the block size, the Ethereum Project will be able to execute improvements to the UTX protocol that increase deal speed and reduction charges.
The significant distinction between the two platforms comes from the functional system that the 2 groups utilize. The decentralized aspect of the Linux Foundation and the Bitcoin Unlimited Association represent a traditional model of governance that positions a focus on strong community participation and the promotion of agreement. By contrast, the heavenly foundation is devoted to constructing a system that is flexible enough to accommodate changes and add brand-new functions as the needs of the users and the market modification. This design of governance has been embraced by numerous dispersed application groups as a way of handling their projects.
The significant difference between the two platforms comes from the reality that the Bitcoin community is mostly self-dependent, while the Ethereum Project anticipates the involvement of miners to subsidize its development. By contrast, the Ethereum network is open to factors who will contribute code to the Ethereum software stack, forming what is known as “code forks “.
Just like any other open source innovation, much debate surrounds the relationship in between the Linux Foundation and the Ethereum Project. Although both have actually embraced different perspectives on how to finest use the decentralized element of the innovation, they have actually both nonetheless striven to establish a favorable working relationship. The designers of the Linux and Android mobile platforms have freely supported the work of the Ethereum Foundation, contributing code to secure the performance of its users. The Facebook team is supporting the work of the Ethereum Project by supplying their own structure and creating applications that integrate with it. Both the Linux Foundation and Facebook view the heavenly job as a way to advance their own interests by supplying a cost scalable and efficient platform for users and developers alike.
Just put, Cryptocurrency is digital money that can be utilized in location of standard currency. Essentially, the word Cryptocurrency comes from the Greek word Crypto which suggests coin and Currency. In essence, Cryptocurrency is simply as old as Blockchains. The distinction in between Cryptocurrency and Blockchains is that there is no centralization or journal system in place. In essence, Cryptocurrency is an open source procedure based on peer-to Peer deal technologies that can be executed on a distributed computer network. How Crypto Currency Works
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How To Build App On Ethereum – The term “Ethereum Cryptocurrency ” is a relatively brand-new term in the world of finance and is associated to digital currency itself. Well, it is a form of currency that is developed on the “Ethereum ” platform.
Now, digital currencies are actually just digital deals between individuals. If you desire to send cash abroad, all you do is transform the currency you ‘re using into whatever currency the recipient is using.
What is needed is a method for individuals to make deals without needing to handle any currency at all. Basically, this indicates you can take your money and make a deal that includes no currency at all. In order to accomplish this, you would need to utilize something called “cryptocoins “. These are little smart contracts that run on the “blockchain “. They are accountable for making the whole deal as safe and secure as possible. Lots of individuals still aren ‘t quite sure what the “blockchain ” is, so this becomes their big question.
Generally, the “blockchain ” is like the Internet with money. Think of it as a journal where anything that ‘s been done is logged in. Any new transactions are then contributed to the ledger. Much like the Internet, there ‘s a great deal of potential for abuse with the journal, which is why there ‘s always somebody who ‘s attempting to get a piece of it. That ‘s why we need cryptography in order to ensure that the journal stays safe.
The problem with most digital currencies is they have too many similarities with conventional currencies. For instance, all of the major economies print their own currency. This makes them extremely easy to track. Even if you understood how to find all of the different governments ‘ currency logs, you still wouldn ‘t be able to find out their rates of interest, their political activities, and even their latest financial reports. With this info, you might quickly manipulate the value of the cash and take advantage of their weaknesses.
By using a digital currency based upon cryptography, you ‘ll have the ability to make safe deals that will be hard to foil. You ‘ll also have the ability to ensure that you aren ‘t costs more than you should, given that there won ‘t be any paper tracks left behind. As you understand, governments all over the world are stressed over terrorism, which is why they keep a close eye on any kind of deals that are made online.
There are some business out there that are working on establishing new types of cryptography that will be used on the Internet. In the mean time, there are numerous popular cryptosystems that you can utilize for now. Some popular examples of these consist of Zcash, Vitalik, Prypto, and ECDSA.
Given that the Internet is utilized around the world, you desire to make sure that there isn ‘t going to be an issue when sending private messages in between your computers. That ‘s what it ‘s truly all about.
When looking for this type of service, try to find something called a personal key service. It ‘s extremely comparable to what you would use for an ATM, just it ‘s far more personal and advanced. The majority of the time, you can get this type of cryptography totally free, however if you ‘re prepared to spend for it, you ‘ll be able to get more security than ever previously. This is just one of the numerous features that come with using this kind of system.
Even though there are a lot of places to buy this technology, you ought to make certain that you ‘re handling a legitimate business that has a great track record. You don ‘t wish to put your monetary information at threat. There are plenty of phishing websites out there that will promise to let you in on some highly categorized info, just to rob you blind. Discover a trusted expert to manage your looking for ERC Cryptography.
What ‘s great about it is that it ‘s been shown to be safe and secure, so it shouldn ‘t be tough to make the modification from using codes and passwords to making this kind of personal recognition system necessary. There ‘s absolutely nothing worse than having all of your info stolen, isn ‘t it? It ‘s certainly not a very excellent feeling when someone gets hold of your social security number or other individual information.
The term “Ethereum Cryptocurrency ” is a fairly new term in the world of finance and is related to digital currency itself. Many people still aren ‘t quite sure what the “blockchain ” is, so this becomes their huge question.
Just like the Internet, there ‘s a lot of potential for abuse with the journal, which is why there ‘s always somebody who ‘s attempting to get a piece of it. You ‘ll also be able to make sure that you aren ‘t costs more than you should, given that there won ‘t be any paper tracks left behind. What ‘s excellent about it is that it ‘s been proven to be secure, so it shouldn ‘t be hard to make the change from using codes and passwords to making this kind of individual identification system compulsory. How To Build App On Ethereum
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Should the pursuit of carbon credit and clean development mechanism set up under UNFCCC be maintained even through there has been a massive slide in the value of carbon credit? Discuss with respect to India's energy needs for economic growth.
In the past years, the prices of carbon credit have taken a huge hit due to reduced demand from the European markets, and introduction of limits/caps on buying of carbon credits by various countries like Australia. Also, countries like Japan, which was a major market for carbon credits, have taken steps to meet their industries’ demand for carbon credits domestically. Additionally, the fact that the talks to extend the commitments made in the Kyoto Protocol have not materialised into any agreement has hurt the market and has dissuaded businesses from opting for clean energy.
India has been a major seller of carbon credits ever since the CDM was put in place. Since the prices crashed, Indian businesses have been holding onto their stockpiles of credits waiting for the demand to go up, leading to a price rise. If India, like China, implements schemes that can domestically soak up the credits that are generated in India, it would boost trade. India’s setting up of carbon emission limits through self-regulation or in consonance with an international treaty, could also boost the domestic carbon trading markets. CDM uniquely combines business interests with clean energy, and promotes usage of clean energy by allowing entrepreneurs to make economic gains from it. Most clean energy comes from renewable sources of energy, so it will be in India’s long-term energy interest to give a boost to CDM, which will indirectly result in large scale usage of renewable energy, thus limiting India’s dependence on oil and other non-renewable sources of energy.
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Like language literacy, where your reading grade level quantifies your competency, financial literacy is gradated.
Novices have little to no understanding of even the most basic financial concepts. Intermediates grasp the basics of spending and saving but may struggle with more abstract or longer-term concepts, like estate planning and investing for retirement. Experts have the knowledge and confidence to manage all aspects of their financial lives and equip others – kids, parents, domestic partners, friends, employees – to do the same.
Needless to say, no one is born with expert-level financial literacy, and no one achieves it overnight. But that’s not to say that becoming financially self-sufficient requires years of intensive study – far from it.
Further Reading on Financial Literacy
If you’re ready to boost your financial literacy, you’ve come to the right place. We’ve gathered together pieces on each of the main financial literacy topics. Use the links to open articles that catch your eye, and remember to share your thoughts in the comments!
1. Money Management
From spending and saving to where you keep your money, learn how to handle your finances on a day-to-day basis.
Budgeting & Saving
Learn all about near-term budgeting and saving here.
- 12 Steps for How to Make a Budget – Personal Budgeting Tips for First-Timers. Budget doesn’t have to be intimidating. Follow this step-by-step guide to craft a sustainable household budget.
- 4 Budgeting Alternatives to Meet Your Financial Goals. Traditional budgeting doesn’t always work. Learn how to apply these four alternatives to your financial situation.
- Understanding Why Budgets Fail – 8 Steps to Fix a Broken Budget. Learn how to shore up a budget that’s not working for you.
- How Zero-Based Budgeting Can Help You Better Manage Your Finances. This simple method can help you make the most of each dollar so your income aligns perfectly with your expenses.
- How to Stop Living Paycheck to Paycheck. It’s time to stop living hand to mouth.
- Outdated Money Advice – 12 Financial Assumptions You Should Reconsider. Think twice about these pieces of financial wisdom that may no longer apply today.
- 5 Best Money-Saving Strategies Proven to Work for Anyone. Saving money isn’t rocket science. These tips are simple and easy to follow, no matter your financial situation.
- How to Maximize Your Savings Rate – 12 Tips to Save More Money. Get serious about preparing for your future and building wealth with these tips to boost your savings.
- How Kakeibo (Japanese Budgeting Method) Can Save You More Money. Kakeibo focuses on four key questions: how much money you have available, how much you want to save, how much you’re spending, and how can you improve.
- KonMari: How Marie Kondo Can Help You Get Organized & Save Money. You can tidy up your finances like you tidy up your house. Read all about “Kondoing” your finances.
- How Swedish Death Cleaning Can Transform Your Home & Finances. Learn what this Nordic decluttering scheme can do for your financial health.
- Shopping Addiction & Compulsive Buying Disorder – Help for Shopaholics. Compulsive buying is no laughing matter. Learn how to recognize and treat a shopping addiction.
- How to Stop Overspending and Get Your Budget Under Control. Not all overspending stems from addiction. This article outlines steps you can take to quell overspending in all its forms.
- What Is a Spending Ban – Rules, Financial Benefits, Pros & Cons. Take things to the next level with a total ban on non-essential spending.
- 11 Things You Can Get for Free – How to Get Free Stuff. Who doesn’t like free stuff? Opportunities to nab free goodies are everywhere.
- 9 Ways to Avoid Lifestyle Inflation – Spending Less When You Earn More. The correlation between higher income and higher spending is real. Learn how to save more as you earn more.
- How to Avoid Frugal Fatigue by Splurging on These 12 Cheap Luxuries. Even the most disciplined, frugal consumers get tired of pinching pennies. These 12 luxuries make fastidiousness more bearable without seriously impacting your budget.
Banking & Alternatives
Explore banking and legitimate alternatives to manage your money.
- 7 Tips to Streamline Your Bank Accounts for Easier Money Management. Don’t make banking more complicated than it needs to be.
- 17 Money Hacks & Tips to Save More When Banking or Buying. Use these tips to simplify your spending and near-term saving habits.
- 9 Reasons to Break Up With Your Bank – When Changing Makes Sense. When does it make sense to switch banks? We outline nine scenarios here.
- How to Use Reloadable Prepaid Cards for Budgeting and When It Makes Sense. Can you forgo a bank account altogether and use reloadable prepaid debit cards to manage your monthly budget? With discipline, it’s doable.
- Envelope Budgeting System – How It Works, Pros & Cons. This old-school, cash-based budgeting method has long been a viable alternative to traditional banking.
Managing Money With Your Partner
Things like budgeting and saving become more complex with two people. Here’s how to navigate household finances with your partner or spouse.
- Financial Benefits of Marriage vs. Being Single – What’s Better? Financially speaking, what’s better: singledom or the married life?
- Should Married Couples Combine Their Finances or Keep Money Separate? It’s an age-old question: Should you merge finances after marriage or keep your money separate? That answer is: It depends.
- 18 Money Management Tips for Newly Married Couples. Avoid financial growing pains with these 18 tried-and-true tips for newlyweds.
- How to Agree With Your Spouse About Money & Avoid Financial Problems in Marriage. You won’t agree on everything with your spouse, but these principles will help you find common financial ground and work as a team.
- 6 Common Money Arguments Between Couples and How to Deal With Them. How many of these money arguments have you had with your spouse or partner?
- 8 Money Lies That Damage Your Finances & Hurt Your Marriage. Honesty is the best policy in marital money matters.
- How to Deal with a Lying Spouse – Financial Infidelity in Marriage. You’ve found out your partner is keeping a money secret from you. What do you do now?
- What Is a Prenuptial Agreement – Do You Need One Before Marriage? Prenups aren’t just for the rich and famous. Here’s why you might need one.
- What Is Common Law Marriage – States, Rights & Requirements. You might be married and not even know it. Learn about the requirements for and implications of common law marriage.
- What Is a Cohabitation Agreement – Why You Need One Before Living Together. You’ve heard of prenups for married couples, but how do you handle things with a long-term romantic partner? With a cohabitation agreement.
- 10 Steps to Switch to a Single-Income Family. A single-income family is still possible these days, but it takes some work. Here’s what you need to know if you’re considering making the switch.
2. Understanding & Managing Debt
Make the wide and often daunting world of credit and debt less intimidating by reading these pieces.
Your Credit Score
Your credit score plays a crucial role in your financial health. Learn how credit scores work and what your score means.
- How to Check Your Credit Score – Subscription Services & Free Monitoring. Do you need to pay to check your credit score? The short answer is no – but that’s not the end of the story.
- What Is a Good Credit Score – Understanding Credit Ratings & Ranges. What makes a good credit score? It depends who you’re asking.
- Should You Pay for a Credit Monitoring Service? – Best Options. We review some of the top credit monitoring options and determine when it makes sense to pay for this service.
- 8 Tips on How to Improve Your Credit Score Rating. Over time, these simple strategies could improve your credit score.
- 7 Ways a Bad Credit Score Can Negatively Affect You – How to Track Your Credit Score. Why is bad credit bad? We outline seven ways a subprime credit score can get you into trouble and offer some solutions.
- How to Rebuild & Fix Your Credit Score – 7 Steps to Follow. Use these strategies to recover from a serious credit setback.
- 10 Credit Score Myths Debunked – Get the Real Facts. Financially literate consumers know how to sort financial disinformation, like these credit score myths, from fact.
- How to Lock or Freeze Your Credit and Why You Should Do It. Learn how to freeze your credit when you’re not actively applying for new loans or lines, and when it makes sense to do so.
- How to Protect & Improve Your Credit Score While Married. Married consumers have two credit profiles to worry about. Here’s how to keep yours strong.
- How Does Bankruptcy Affect Your Credit Score?. Learn what bankruptcy means for your credit score. Spoiler: It’s not good.
The credit card is the most common type of unsecured consumer debt. Here’s what you need to know to be a responsible credit card user.
- Advantages & Disadvantages of Credit Cards – Do They Help or Hurt You? Get an unbiased look at the pros and cons of credit cards.
- How Many Credit Cards Should I Have? How many credit cards do you really need? There are several factors to consider.
- The Real Cost of Using Credit Cards – Other Than Interest Rates, APR & Annual Fees. Even if you’re pro-card, you should know these drawbacks of using credit cards.
- How to Use 0% Balance Transfer Credit Cards Responsibly. Using a 0% APR balance transfer card to pay down high-interest debt can be a smart move – if you’re responsible about it.
- How Travel Loyalty Programs Work – Earning, Valuing & Redeeming Reward Miles. Learn how to get the most out of your credit card’s potentially valuable travel rewards program – and how to read its fine print.
- Does Closing a Credit Card Account Hurt Your Credit Score?. Closing a credit card account could adversely impact your credit score. Here’s how to mitigate the damage.
Other Types of Debt & When to Use Them
Dive into the dizzying array of debt products available to financially literate consumers and learn how they work.
- What Is Compound Interest – Definition, Formulas & Obstacles. Compound interest directly affects your borrowing costs. Understanding it is essential to true financial literacy.
- Understanding Federal Student Loans – Types, Repayment & Deferment. From types of loans to repayment options, here’s an overview of how federal student loans work.
- Understanding How Student Loan Debt Affects Your Credit Score. Even well-managed student loan debt can affect your credit score. Learn how to mitigate the impact.
- What Is a Personal Loan – Pros & Cons of Getting One. Should you apply for an unsecured personal loan, rather than a credit card or secured line of credit? We weigh the pros and cons.
- 7 Reasons to Get a Personal Loan – Benefits & Things to Consider. Personal loans aren’t for everyone. Here’s how to determine if they’re right for you.
- 6 Tips to Get Approved for a Home Mortgage Loan. Planning to buy a house in the near future? These strategies could increase your loan approval chances.
- What Is an FHA Mortgage Loan – Requirements, Limits & Qualifications. FHA mortgage loans offer key benefits for first-time homebuyers with limited capital, but they have some major downsides too.
- What Is a VA Home Loan – Mortgage Eligibility, Benefits & Limits. If you or a family member have served in the military, you may be eligible for this unique type of mortgage loan.
- FHA vs. VA vs. Conventional Mortgage Loans – How Are They Different?. Learn the benefits and drawbacks of these three types of mortgage loans.
- USDA Home Mortgage Loans for Rural Development – Eligibility Requirements. For qualifying rural homeowners and homebuyers, USDA loans offer fantastic benefits.
- How to Get a Mortgage Loan If You’re Self-Employed With Fluctuating Income. Irregular income makes budgeting hard enough. Qualifying for credit when you’re self-employed often feels impossible. These strategies may help.
- Cosigning a Loan – Understanding the Reasons & Risks. If you have good credit, should you assume the risk of cosigning a loan for someone who might not otherwise qualify? Learn more here.
Paying Down Debt
These articles can help you manage and reduce existing debt loads.
- How to Get Out of Credit Card Debt Fast – 5-Step Pay-Off Plan. If you’re overwhelmed by credit card debt, read this.
- What Is Credit Counseling – How Debt Management Plans Work. Credit counseling services offer a new perspective on managing debt and may help you reduce your balances faster. But be on the lookout for predatory lenders.
- What Is a Debt Consolidation Loan – How It Works, Pros & Cons. Learn when it makes sense to use a personal loan for debt consolidation and when you might want to pursue other alternatives.
- 16 Ways to Reduce & Avoid Overwhelming College Student Loan Debt. These tips may help you get a handle on your student loan debt.
- How to Refinance Private and Federal Student Loans – Pros & Cons. Should you refinance your student loans? We weigh the pros and cons.
- Public Service Student Loan Forgiveness – Program Eligibility & How to Qualify. Public Service Loan Forgiveness is a godsend for loan-laden graduates with qualifying jobs. Learn about its benefits and potential tradeoffs.
- Pros & Cons of Paying Off Your Adult Child’s Debt & Loans. Should you give your adult child the gift of a fresh financial start? We weigh the arguments for and against it here.
- 7 Steps to Rebuild Your Finances & Credit After Bankruptcy. Recovering from bankruptcy is a long road. Start here.
- Should I Pay Off My Mortgage or Student Loans First? Determine whether it makes sense to pay off these debts early and, if so, how to prioritize them.
- 5 Ways to Pay Off Your Home Mortgage Loan Early. If you’re trying to own your home free and clear before your mortgage term ends, consider these strategies.
- 4 Good & Bad Reasons to Refinance Your Home Mortgage Loan. If you’re going to refinance your home loan, do it for the right reasons.
- How to Stop & Avoid Foreclosure on Your Home. Foreclosure can be a disruptive, humiliating experience. Learn how to avoid it, no matter how dire your financial straits.
3. Increasing Your Income
Explore these income-boosting opportunities and strategies to help shore up your budget and make it easier to plan for the future.
- 6 Popular Side Gigs Reviewed – Best Ways to Make Extra Money. Renting out your spare room, driving for Lyft, and more – find out if any of these side gigs are for you.
- How to Become a Freelancer – Types of Work, Pros & Cons. If you’re intrigued by the freelance life, read this to learn what it does – and doesn’t – entail.
- Online Freelancer Guide – How to Find Gigs & Earn More Money. Think of this comprehensive guide as a road map to freelancing success.
- 14 Best Freelance Websites to Find Jobs Online. Use these reputable websites to find one-off and long-term freelance work online.
- Driving for Ride-Sharing Apps Like Uber & Lyft – How It Works, Benefits & Drawbacks. Here’s what you need to know before you sign up to drive for a ride-sharing app.
- How to Start Your Own Side Business While Working Another Job. If you’re not quite ready to cut the employment cord and work for yourself full-time, this guide can help ease the transition.
- 9 Passive Income Stream Ideas & Opportunities to Make Money. Want to earn money regularly without taking on an extra job? Learn what it takes to create a passive income stream for yourself.
- Tax Benefits of Real Estate Investment Properties – IRS Rules Explained. Real estate investing is a popular passive income opportunity with significant tax benefits. This article sorts myth from fact.
4. Financial Planning
Start here for guidance on financial planning and related concepts, such as taxes and goal-setting at different stages of life.
- 7 Types of Financial Advisors & Professionals and When to Hire Them. Financial professionals don’t all fit the same mold. Learn about seven distinct types and their core functions.
- Choosing a Financial Planner vs. an Investment Advisor – What’s the Difference?. You might need both, but maybe not at the same time.
- How to Find & Choose a Financial Advisor – 7 Things to Consider. Use this guide to evaluate financial advisor candidates and narrow down your choices.
- Why You Should Hire a Certified Financial Planner – Benefits. Learn more about the benefits of using a Certified Financial Planner to realize your long-range financial vision.
- 6 Ways to Protect Yourself From the Effects of Inflation & Loss of Purchasing Power. You don’t need a financial planner or advisor to implement these inflation protection strategies.
- What Do Rising Interest Rates Mean for You? – Effects & How to Prepare. While you can’t control interest rate fluctuations, you can take steps to reduce their impact on your assets and financial goals.
Setting Financial Goals & Principles
These articles cover the art and science of establishing your financial principles and setting achievable goals.
- 8 Financial Tips for College Students to Save and Manage Money Better. It’s never too early to start saving. If you’re a frugal college student, use these tips to get a head start on financial responsibility.
- Top 5 Personal Finance Tips for Recent College Graduates. These basic personal finance tips lay the foundation for a lifetime of financial well-being.
- Investing & Financial Advice for Millennials – 6 Principles to Build Wealth. These six principles can help you achieve financial security in an increasingly uncertain world, even if you’re not technically a millennial.
- 10 Lessons I Learned About Money Management as a Young Adult in My 20s. For 20-somethings, financial freedom can feel impossibly far off. But it’s never too early to start practicing sound money management.
- 5 Money Rules to Live By in Your 30s. Learn five principles to live by after hitting the big 3-0.
- 9 Ways Single Parents Can Avoid Financial Hardship After Divorce or Death. Roughly half of all marriages end in divorce. If you have minor children caught in the middle, these strategies can reduce the material impact of your split.
- How to Become Financially Independent Quickly Using the FI Formula. Learn about a simple but accurate calculation that reveals how long it will take you to achieve financial independence.
- 13 Retirement Planning & Savings Mistakes You Need to Avoid. These long-range mistakes are as common as they are avoidable.
- How to Plan for Old Age & Elder Care When You Don’t Have Kids. More couples than ever are choosing not to have kids, and many adults don’t pair up at all. Here’s how child-free folks can prepare for the day when they’re no longer able to care for themselves.
- 7 Important Financial Tips From the Bible – Verses About Money. You needn’t be religious to appreciate these commonsense bits of biblical money wisdom.
- How to Get Money for a Down Payment on a House – 16 Strategies & Tips. Your home is probably the biggest purchase you’ll ever make. Use these strategies to save or scrounge up funds for a substantial down payment. Remember, every dollar you put down is a dollar you don’t have to borrow from your mortgage lender.
Taxes can be complicated, but you can’t avoid them. Here’s what you need to know to prepare yours.
- 5 Year-End Tax Planning Strategies to Save More Money. Following these strategies before the tax year ends on December 31 can reduce your burden when you file.
- 5 Different Types of Taxes and How to Minimize Them. Income tax isn’t the only thing Uncle Sam asks you pay. Learn about the types of taxes you might owe and how to save on them.
- Standard Deduction vs. Itemized Tax Deduction – What’s Better? Weigh the financial pros and cons of taking the standard income tax deduction or itemizing your deductible expenses.
- 12 Common Tax Filing Mistakes & Errors and How to Correct Them. These tax filing mistakes may increase your audit risk and expose you to penalties and interest. Here’s how to correct them – or, better yet, avoid them altogether.
- How to Pay Federal Estimated Taxes Online to the IRS. Freelancers, business owners, and many others must pay estimated taxes to the IRS. Learn how to pay yours seamlessly without writing a check.
- How to Calculate Real Estate Property Taxes & Appeal Your Assessment. If you suspect your property tax assessment is inaccurate, you have recourse. Start here.
You never know what the future holds. Here’s how to decide how much coverage you need to protect yourself against the unforeseen.
- What Is Health Insurance – Definition & How It Works. Most people have health insurance, but many don’t understand how it works. Here’s your crash course.
- 11 Best Part-Time Jobs With Health Insurance Benefits. These employers provide health insurance coverage to employees who work less than full-time. If your full-time job doesn’t offer health insurance or your self-employed plan options are too expensive, this might be your solution.
- How Much Life Insurance Do I Need? – Typical Coverage Amounts. Use this guide to determine whether you need life insurance and how much.
- What Is Umbrella Insurance – Do I Need a Policy?. Umbrella insurance could protect you from otherwise ruinous liability claims. Learn how it works and when it makes sense.
- 10 Ways to Save Money on Affordable Car Insurance. Use these tips to reduce your auto insurance costs without compromising on coverage.
- What Does Homeowners Insurance Cover & How Much Do I Need? Protect your home and possessions without paying for coverage you don’t need.
- Do I Need Flood Insurance? – What It Covers & Policy Costs. Regular homeowners insurance policies don’t cover flood damage. If you live in a flood-prone area, that’s a problem.
- 6 Myths About Renters Insurance – Why You Need It. Do you really need renters insurance? Read this and decide.
- What Is Disability Insurance? – Benefits & Why You Need It. Learn about the benefits, suitability, and cost of disability insurance, which provides financial protection if you become unable to work for an extended period.
- What Is Travel Insurance and Do I Need to Buy It? Travel insurance reduces the financial risk associated with travel nightmares such as lost luggage, missed connections, canceled flights, and sudden illness. But is it really necessary? Read this to find out.
- What Is Pet Health Insurance – Cost, Policies & Coverage. Vet bills can be expensive. Pet health insurance can help, but it’s not for everyone. Here’s what you need to know.
Explore the concepts and principles you must understand to make informed investing decisions.
- Investing as a Student: 7 Ways to Get Started Young With Under $1,000. Just as it’s never too early to start saving, it’s never too early to start investing.
- 12 Ways to Reduce Risk in Your Stock Investment Portfolio. No investment is wholly without risk, but these strategies may reduce needless exposure.
- Safe Withdrawal Rates for Retirement – Does the 4% Rule Still Apply? How much can you safely withdraw from your retirement accounts? We investigate whether the longstanding “4% rule” applies today.
- Sequence of Returns Risk – How It Can Make or Break Your Retirement. Learn how to mitigate the risk of a serious market downturn early in your retirement.
- 6 Best Investments for Retirement Planning. For retirement investors, not all financial instruments are created equal. These six among the best.
- 7 Worst Dangerous Investments That Can Hurt You Financially. This is the other side of the coin: instruments that most investors should steer clear of.
- The Rise of Virtual Financial Robo-Advisors for Your Investments – Types, Pros & Cons. Should you stick with your human financial advisor or switch to an automated investing platform? We weigh the pros and cons here.
6. Estate Planning
The sooner you start thinking about estate planning, the better.
- What Is Estate Planning – Basics & Checklist for Costs, Tools, Probates & Taxes. Think of this as Estate Planning 101 – everything first-timers need to know about the daunting world of estate planning.
- 10 Legal Myths About Estate Planning – How Wills & Trusts Really Work. Here, we sort estate planning myth from fact.
- How to Write and Update a Will – The Process You Need to Know. Learn how to express your final wishes in a legally binding document and update that document as your personal circumstances change.
- Intestacy Rules & Laws – What Happens When Dying Without a Will. Most Americans die without a will. Here’s what happens next.
- What Is a Trust Fund – How It Works, Types & How to Set One Up. “Trust fund” is often seen as a pejorative term, but guaranteeing income to an entitled kid is far from its only function.
- Estate & Inheritance Tax – Threshold, Rates & Calculating How Much You Owe. Are you liable for estate tax? Most Americans aren’t, but other taxes may apply to assets distributed from deceased taxpayers’ estates.
- What Is the Gift Tax – IRS Rules, Rate & Maximum Exclusion Limit. Learn about the gift tax, which may limit what you’re able to distribute to your heirs before and after your death.
- 5 Legal Facts You Need to Know About Incapacity Planning. Difficult as it is, you must plan for the day when you’re unable to make legal decisions for yourself.
- How to Talk to Your Aging Parents About Estate Planning & Advance Care – Questions to Ask. Don’t put off having these legal and financial conversations with your parents.
- What to Do When a Family Member Dies – Estate Settlement & Probate Process. Nothing can prepare you for a family member’s death, especially if it’s unexpected. This article can help you navigate the legalities and logistics of paying for their final expenses and distributing their assets.
7. Teaching Kids About Personal Finance
Not sure how or when to talk about money with your kids? Start here.
- 5 Tips to Use When Teaching Kids About Money and Finances. Impart financial wisdom to your youngsters with these five strategies.
- 20 Ways to Teach Kids How to Save Money Responsibly at Any Age. No matter how old your children are, it’s never too early to teach them the importance of saving.
- 8 Habits to Avoid When Teaching Kids Financial Responsibility. Don’t fall into these tempting but counterproductive financial education traps.
- How to Build Credit for Your Kids While They’re Young – What to Do & When. Helping your kids build credit as teenagers instills sound financial habits and gives them a leg up when they’re off on their own.
- 25 Ways to Teach Your Kids About Gratitude This Thanksgiving. No matter how modest your financial circumstances, you can make sure your kids understand how fortunate they are.
- How to Avoid Raising Spoiled Kids – Signs of Entitled Behavior. Is your kid spoiled? Watch out for these warning signs, and if the answer is yes, learn what you can do to set things right.
8. Avoiding Financial Scams
Financial scams are far too common. Learn how to spot them ahead of time and seek redress if you’re a victim.
- 7 Government Imposter Scams to Watch Out For. Some of the savviest financial scams prey on our inherent trust of government employees. Learn how to spot “government” outreach that doesn’t seem quite right.
- How to Avoid Bait & Switch Advertising Scams Offering “Free” Stuff. Equip yourself to resist offers that seem too good to be true.
- How Payday Loans Work – Biggest Dangers & 14 Better Alternatives. Payday lending isn’t an outright scam, but it’s inherently predatory and almost never appropriate, even for unbanked consumers with poor credit.
- Mortgage Relief & Loan Modification Scams You Should Watch Out For. Learn how to spot common home loan scams likely to leave you worse off.
- Why You Should Stay Far Away From Tax Refund Anticipation Loans (RALs). Tax Refund Anticipation Loans are tempting but rarely necessary. Here’s why.
- How to Spot & Avoid Predatory Lending (& What to Do If You’re a Victim). Predatory lending practices come in many forms. Here are the most common and how to seek recourse for them.
- What to Do If You Suspect You’re a Victim of Identity Theft. Learn how to recognize and protect against identity theft, as well as what you can do if you’re a victim.
- How to Prevent & Avoid Child Identity Theft – Protection For Your Kids. Children are vulnerable to identity theft too.
- How to Deter Thieves and Avoid Getting Mugged. Learn how to protect your cash, credit cards, and identification documents against physical theft.
- How to File a Complaint With the Consumer Financial Protection Bureau (CFPB). If you suspect you’ve been victimized by an unscrupulous or predatory financial institution, your best course of action may be to file a complaint with the CFPB, a federal agency charged with protecting consumers.
9. Miscellaneous Financial Literacy Topics
These sundry topics are no less important for failing to fit into the categories above.
- 9 Places to Find Missing Money – How to Search for Unclaimed Funds. You may have a legitimate claim to dormant funds held in pension plans, escrow accounts, and employers’ payrolls.
- How to Get Help with Paying Rent – Assistance Programs & Resources. Use these formal and informal resources when you’re unable to pay rent.
- What Is FDIC Insurance? – History, Coverage, Limits & Rules for Banks. Learn about the Federal Deposit Insurance Corporation, which insures certain bank account deposits up to legal limits.
- What Is SIPC Insurance? – Coverage for Your Brokerage Account. The Securities Investor Protection Corporation provides some financial protection for assets held in brokerage accounts, though it’s not as comprehensive as FDIC insurance.
It bears repeating: Financial literacy is a journey, not a jaunt. The above list is only a portion of the articles we offer on various financial topics – and comprehensive as we strive to be, we don’t claim to offer the last word on every single financial topic out there.
The best thing you can do for your personal financial literacy is to become a voracious, educated consumer of finance-related content. As you increase your information consumption, use your existing value system, personal circumstances, and life goals to inform your opinions and objectives.
And don’t be a stranger. We’re here to help you become a smarter, more confident consumer.
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Credit cards are a great way to make purchases easily, borrow money conveniently, and sometimes even earn money when you use them. But how does using a credit card work, and why are credit cards used? Here’s everything you need to know about how to use credit cards for dummies. No, we don’t actually think you’re a “dummy” but, you know, it’s a common expression!
What is a credit card, anyway?
A credit card is a kind of payment card that you can use to make instant purchases, pay bills and, in some cases, make cash withdrawals. Credit cards are thin, plastic or metal, wallet-sized cards. They contain a magnetic stripe and/or tiny radio frequency identification (RFID) chip that communicates the card’s account number and other details to specialized card readers.
How do credit cards work? When you use a credit card to buy something, the money for that transaction does not come out of your bank account as it would if you were using a debit card. Instead, the bank that issued you the credit card—called the credit card issuer or creditor—pays the merchant for the transaction at the time of purchase and then bills you later.
Credit cards provide you with a revolving line of credit. When a bank issues you a credit card, it assigns the card a credit limit based upon factors including your income and creditworthiness. With your credit card, you can spend any amount up to that credit limit. After you repay the bank for some or all of your charges, you may borrow up to your credit limit again, and the cycle repeats.
When were credit cards invented?
Two men named Ralph Schneider and Frank McNerma created credit cards, as we know them today, in 1950. They created a charge card called the Diner’s Club Card that allowed people to use credit to make purchases at any business but required them to repay their debt in full by the end of each month.
The Diner’s Club Card was the first credit product of its kind that people could use on purchases at associated merchants. However, modern credit cards allow customers to carry balances if they choose to.
How is a credit card different from a debit card?
Credit and debit cards may seem similar because they look alike, and you can use either to make payments, but when it comes down to where the funds come from to pay for the transactions, they are quite different.
How do credit cards work, and how do debit cards work? Credit cards use money from a card issuer to make payments, allowing the credit card holder borrows that money temporarily.
On the other hand, debit cards use the money immediately available in a cardholder’s checking or savings account to cover transactions. If a cardholder does not have enough available money, the bank may decline their transaction or overdraft their account—go into a negative balance—and they will need to pay a fee and deposit more money into their account.
The fact that paying with a credit card does not immediately withdraw money from your bank account is a more important benefit than many people realize for a few reasons: Fraud, merchant holds and cash flow.
Fraud: If a criminal gets your debit card (or just your debit card number), they can empty your bank account with a few charges — whether you have $10 in your account or $100,000! Most banks will give you your money back as long as you report the theft immediately, but it can take several days. Those are days in which you won’t have access to your money. If a criminal uses your credit card, it’s the bank’s money, not yours.
Merchant holds: When you book a hotel room, reserve a rental car or even buy a tank of gas, the merchant places a hold on your credit or debit card over and above the cost. This hold ensures you have the money to pay for hotel incidentals; rental car damages, fuel or excess mileage; or enough gas to fill your tank. When you pay with a debit card, these holds tie up your money for up to four days.
Cash flow: Credit cards can allow you to spend money you don’t yet have. That can be dangerous, of course. But there are times when this benefit is helpful and can be used responsibly — especially for very short periods of time. Let’s say you’re changing jobs and taking a week off in between in which you won’t paid. On top of that, your new job’s pay cycle is different than your old job, so it will be several weeks before you get a paycheck. But your new job pays more, so you’ll more than enough money to afford your monthly expenses…it’s just going to take a while to get. Even if you’re down to $50 in your bank account, you can use a credit card to buy groceries and gas until your new paycheck comes in, at which point you can pay your credit card bill without ever incurring interest.
The smartest consumers aren’t those who use debit cards for everything, they’re the ones who know how to use credit cards strategically while never going into debt.
Credit card issuers
Credit card issuers are banks and credit unions that offer their customers lines of credit if they deem them responsible enough to use a credit card wisely. Credit is like a loan, in which the credit company advances funds to cover your purchases and then charges you interest for the privilege. Because credit card issuers initially cover your purchases, before they agree to give you credit, they must determine that you do not pose too much of a risk to them.
Each time you use a credit card to make a purchase, your card issuer must approve that purchase. If approved, your bank makes the payment for you, and you owe it the full purchase amount—like a small loan. Credit card issuers partner with third-party networks like Visa and Mastercard that process your payments. That’s why your bank-issued card will usually bear the brand of one of these companies.
A card issuer may choose not to authorize a purchase if a problem exists with your account. For example, it may decline a transaction if you have exceeding your credit limit or failed to make a payment on-time.
The largest credit card issuers in the United States today are Capital One, Chase, Bank of America, Citi, American Express, and Discover.
How to get a credit card
To get a credit card, you must qualify financially. The lender must consider you creditworthy, and it determines this by running a credit check.
You begin by applying for a credit card either online, by phone or by mail. A credit card application is very simple and asks for:
- Your legal name
- Your address
- Your date of birth
- Your Social Security Number (SSN)
- Your income
The issuer will either approve the application and mail you the credit card or – if you do not meet the financial qualifications — deny your application. In some cases, they may ask for more information prior to making a decision.
But how do you get a credit card when you don’t have established credit? In this situation, you can apply for a secured credit card. Secured credit cards work just like other credit cards except that you must provide a security deposit in order to open one. The security deposit is usually a few hundred dollars. The bank will refund your deposit when you close the account as long as you have paid your credit card bills in full. Typically, if you pay your credit card bills on time for a year or two, the bank will also upgrade your account to a regular, unsecured credit card and refund the deposit.
Full-time college students may also be eligible to receive a student credit card with reduced credit requirements and no security deposit requirement.
Credit card credit limits
If the lender approves your application, your credit issuer will assign you a credit limit. This limit is not flexible. If you try to make purchases that will exceed your limit, your bank will most likely decline to authorize them. This limit is subject to change at your bank’s discretion and may increase or decrease over time. Your card issuer will notify you of any changes to your limit.
Available credit and credit limit both relate to how much you may charge to your card. Your available credit refers to how much of your total credit limit remains after subtracting your current balance.
How do credit cards work when your bank gives you a low credit limit? Because borrowers don’t get to choose credit limits for themselves, some are stuck with lower limits than they would like.
If the credit limit you’ve received feels restrictive, the best thing you can do is use your card regularly and do so responsibly, which means paying your bill the same month and not carrying a balance from month to month. This payment pattern will prove that you can manage your credit card well, so your issuer may grant you a credit limit increase after several months (if they don’t, you may request one after six months).
How do payments on a credit card work?
Making payments is the essential part of responsible credit card ownership.
A few key terms you’ll want to know are:
- Billing cycles
- Grace periods
- Due Dates
A billing cycle is the period of time between when one statement begins and ends. At the end of each monthly cycle, your credit issuer compiles all of your purchases for that period into a credit card statement then bills this to you. Many credit card issuers start a billing cycle on the first day of the month and end on the last day of the month, but exact cycles vary. A typical cycle is between 25 and 31 days.
Repayments are not usually due on the day they are requested. Grace periods refer to the amount of time your card issuer gives you to make a payment before the lender begins charging interest. The period is often about 23 days after a billing period ends. Due dates are when payments are actually due.
Every statement you receive will include a payment due date. Your statement balance reflects total purchases made over a billing cycle, and your current balance reflects the running total on your card since the last time you paid it off. When a payment is due, this refers to the statement balance.
Most credit cards cost nothing to use as long as you repay all of your monthly charges within the grace period and before the due date. If you do not, the issuer will charge you interest on the unpaid balance
Because the interest rates on credit cards are quite high — much higher than on other kinds of credit including mortgages or car loans — I always recommend paying your statement balance in full.
If you do not pay off all of your charges at the end of the month, this is known as carrying a balance.
Each month, the credit card issuer will assess a minimum payment that you must pay by the due date to keep your account in good standing. The minimum payment is usually between 2 and 4 percent of the outstanding balance or a minimum of $10 or $15.
If you only pay the minimum payment or you pay any amount between the minimum payment and the total balance, the bank will charge interest on the remaining balance.
Credit card interest
Interest is money a bank charges a customer for the service of borrowing money.
The biggest benefit to a credit card is that the bank does not charge interest on charges as long as you pay them off within the grace period. In this way, credit cards provide an interest-free short-term loan.
When you do carry a balance on your card from month to month, you will trigger interest, also called finance charges. The bank will add the finance charges to the balance that you owe.
Interest is expressed as an annual percentage rate (APR), but credit card issuers typically calculate the interest using a daily rate, which comes from dividing your card’s APR by 365. For example, if your credit card has an APR of 25%, this means you will pay $25 per year in interest for every $100 owed.
Let’s say your due date is February 1st and you have a $1,000 unpaid balance from the prior month. You will likely see a finance charge for that month of about $21.23. That’s the proportion of $250 annual interest owed for each of the 31 days in January. If you make a $100 payment and don’t spend anything more on your card in February, in March you would see a finance charge of about $17.67. It’s less because of your $100 payment the month before but also because February has 28 days, not 31.
Keep in mind that interest compounds. This means that as finance charges are added to your balance, future finance charges are calculated based on the total outstanding balance — including the previous finance charges.
For simplicity, let’s assume you’re not making any payments on your $1,000 card balance. Excluding fees, at the end of the first year you’ll owe $1,250. Buit at the end of the second year you’ll owe $1,562.50 because 25% of $1,250 is $312.50 in interest that’s added to your balance.
This compounding effect, combined with very high interest rates to begin with, is what makes credit cards very hazardous to your finances if you get behind paying your balance.
Credit card fees
The majority of credit card fees are avoidable.
How do credit cards work when you don’t pay them off by their due date? When you are unable to pay off your credit card on time, you will receive a late fee of between $30 and $40. If you make a payment more than 60 days late, a penalty APR may kick in. This means that your already-high APR will get even higher!
Other common types of fees include:
- Balance transfer fees (when you use your credit card to transfer money)
- Foreign transaction fees (when you make purchases outside of the country)
- Over-the-limit fees (when you exceed your credit limit)
- Annual fees (charged by certain credit cards, but easily avoidable)
- Cash advance fees (for using your credit card to withdraw cash at an ATM)
Types of credit cards
Many different types of credit cards exist besides the standard type we discussed above. For those who want a safer choice or have poor credit, unsecured credit cards, secured credit cards, and charge cards are good options.
Unsecured credit cards do not require a high credit score or a deposit to open. However, they usually come with annual fees and low credit limits.
Secured credit cards often require a deposit when opening. You get this back when you close your account, but it serves as cash collateral until then and is often equal to your credit limit.
Charge cards work like credit cards except you must pay them in full at the end of each month — there’s no option to carry a balance. For this reason, charge cards do not come with credit limits. You need good credit to qualify, but this kind of card can help you build credit without the risk of accumulating debt.
Credit card rewards
During the 1986 Super Bowl, the Sears Corporation launched a new credit card called Discover. In order to lure customers away from Visa and Mastercard, Discover offered to pay customers a small rebate on certain purchases which they called “cash back”.
Whereas previously credit cards were seen primarily as a convenient way to pay and an option for short-term financing, the Discover Card gave birth to a new era in which credit card issuers rewarded consumers for using their cards.
Today, credit card users can earn thousands of dollars a year in cash back, free travel, and other incentives just by using certain credit cards for purchases.
Some credit cards give customers a fixed percentage of their purchases (usually between 1 and 2 percent) back in the form of cash or travel credits. Others offer rebates of higher percentages, but only on certain types of purchases (for example, on dining or travel purchases).
In addition to rewards for each dollar spent, some credit cards offer large up-front rewards known as sign-up bonuses when a new customer opens a card and spends a minimum amount on it.
Merchants pay credit card issuers fees everytime a credit card payment is made. The credit card rewards are simply a percentage of these fees returned to the consumer.
Credit card benefits
Credit cards come with a variety of benefits that many users don’t realize.
For example, most credit cards will refund your money if there is a problem with your purchase that you cannot resolve with the merchant. Let’s say you order something and it either arrives defective, or it doesn’t arrive at all. If the merchant refuses to issue a refund or replace your product, the credit card company will take the charge off your bill. If you paid for that item with cash or a debit card, you’d be out of luck!
Some credit cards also offer insurance for car rentals and, sometimes, travel interruption.
Every credit card features slightly different benefits that can be real lifesavers when something goes wrong.
Frequently asked questions
Are credit cards good or bad?
Credit cards are a powerful financial tool. Like anything powerful, they can be used for good and bad.
When used responsibly, credit cards provide a convenient way to pay with many built-in protections. They can also help you save money by returning a portion of your purchases in the form of rewards.
Used recklessly, credit cards can enable you to spend a lot more money than you have. This can result in an insurmountable debt, ruined credit, or even bankruptcy.
Is it worth getting a credit card?
Having credit cards can improve your credit score and enable you to spend funds you otherwise might not have spent, but they carry risks. You need self-discipline to have a credit card.
Getting a credit card and misusing it is often much more detrimental than not getting one at all. Instead, you might consider a non-standard option such as a secured card or charge card if you’re worried about misusing a traditional credit card.
How do credit cards work when you make payments on time, spend below your limit, and take advantage of rewards?
The answer is that they set you up to develop positive spending habits, can help you become more creditworthy for future lines of credit you need, and give you financial security when emergencies come up and you need access to money.
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It’s important for every consumer to learn what a credit score is and how to improve it. Have more fun with bästa online casino. Most consumers do not know what their credit scores are, but these scores are used in dealings with such diverse agencies as credit card companies, home equity lenders, auto loan lenders, and finance companies when considering appications for credit or loans.
Credit scores are usually calculated by a computer model created, most often, by Fair, Isaac & Company (or “FICO,” leading to the common generic term “FICO score“). A credit score is intended to be a predictive summary of a loan applicant’s credit history. A low score can mean denial of a credit card or loan, or if the application is accepted, a higher interest rate. Also, some lenders use credit scores and other information to set the “price” for processing a loan. Statistically, low credit scores also correlate with other risky behaviors such as fraud and auto accidents.
There a many factors affecting the final credit score. Payment history accounts for 35%. A credit score is negatively affected by a history of late payment of bills, accounts sent to collection agencies, or declared bankruptcy. The more recent the problem, the lower the score — a 30-day late payment a month ago has more effect than a bankruptcy five years ago.
Outstanding debt accounts for 30%. If the amount owing is close to the consumer’s credit limit, this will likely to have a negative effect on the credit score. A low balance on two cards is better than a high balance on one.
Length of credit history accounts for 15%. The longer the accounts have been open, the better.
Recent credit report inquiries account for 10%. If the applicant has recently applied for many new accounts, that may negatively affect the score. Promotional inquiries do not have any effect.
Types of credit in use accounts for 10%. Loans from finance companies generally lower the credit score. FICO finds this more important when there is less of other types of credit information about the applicant upon which to base a score.
Although this is a general guide as to what credit scoring companies deem important, it should be noted that some companies may consider different factors.
Credit scores range from 300 to 900, with an average of approximately 750. According to the model, as the score increases, the risk of default decreases. Studies by the loan industry show a direct correlation between low scores and high default rates. Therefor, it may be difficult for an applicant with a low score to convince a creditor to offer an affordable loan, or even any loan at all. But just as credit history can vary from credit bureau to credit bureau, so can a credit scores. It is possible to have a high score with one credit bureau (Equifax, Experian, or TransUnion) and a low credit score with another, just as it is possible to have a clean credit history with one bureau and a sullied record with another.
However, extremely wide-ranging credit scores are uncommon, though variations of up to 100 points have been noted by some lenders. To get an accurate picture, lenders often take the average of all the applicant’s scores. Narrow ranges of 20 or 25 points are more common.
Consumers may obtain their credit scores from credit bureaus by paying a fee (the Federal Trade Commission sets the fee). The bureau must provide the score, the range of possible scores under the scoring model used, four key factors that affected the score, the date on which the score was created, and the name of the entity that provided the score (such as Fair, Isaac). Note that the score and the scoring model provided may vary from those a given lender uses. Federal law allows consumers three freee credit reports every year. If you get your credit score from one or more credit scorers, remember that the score may vary from one credit score company to the next.
Fair, Isaac offers several reccommendations to consumers seeking to improve their credit scores. Pay bills on time; make up missed payments and keep all payments current. Maintain low balances on credit cards and other “revolving debt”. Maintain the “balance-to-limit ratio” of credit cards below 50%. It is usually better to carry smaller balances on several cards than to pile everything onto one card. Apply for a new card if necessary, rather than piling all purchases onto one.
Pay off debts rather than transferring them to a new account. Don’t close a rarely-used credit account without opening a new one, as a history of wisely-used credit boosts the credit score. However, do not apply for new, unneeded credit cards just to increase available credit.
Loan applicants should not give up seeking credit just because of a low credit score. Sometimes credit reports contain errors, and it is possible to obtain a copy of the report, fix the problem, and explain the situation to the lender. The majority of lenders will override credit scores if they feel an applicant is a good credit risk despite a low credit score.
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New 5G technologies also boast the raw ingredients needed to beam wireless power to small devices.
The US electricity grid is actually five regional grids, and it's hard to share power between them. A macrogrid could bridge the gaps, making electricity cheaper and more reliable.
The COVID-19 pandemic risks reversing progress made to increase access to affordable, reliable and sustainable domestic energy sources in Kenya.
Britain's electricity sector continues to decarbonise, but its capacity to store energy lags far behind.
There will be more weather-driven disasters like February's deep freeze in Texas, and energy planners aren't prepared.
During the Texas cold snap prices jumped 30,000%. We can't allow it to happen here.
The electricity sector is expected to play a key role in Canada's push to net-zero emissions. Enhancing long-distance transmission can be lower the cost of providing clean and reliable electricity.
While Australia doesn't generally experience such extreme winter temperatures, our electricity systems are still vulnerable to climate change, extreme weather and power outages.
Some Texans are receiving eye-popping electric bills after power providers passed on volatile costs to some of their customers – legally.
The weather-related impacts of climate change will increasingly threaten critical infrastructure in the future. Shifting electricity grids towards microgrids could help.
Nigeria's attempt at privatising its power infrastructure hasn't been without challenges but they are not insurmountable.
The Texas electric power market is designed to give energy companies incentive to sell electricity at the lowest possible cost. That focus helps explain why it collapsed during a historic cold wave.
Heat waves, droughts and deep freezes can all strain the electric grid, leading utilities to impose rolling blackouts. Climate change is likely to make these events more common.
Universal energy access can only be achieved if people have the capabilities to use the energy to transform their lives.
Replacing fluorescent lights with efficient LED alternatives is the single best way to cut schools' electricity costs.
Different energy technologies should be explored in Ghana to enhance clean fuel use.
Former Colorado Gov. Bill Ritter explains what Biden's "all hands on deck" approach could look like as the new administration takes on five big climate challenges.
Grid electricity is often said to be critical for long-term human development. But are the substantially higher investment costs justified by the economic impact?
The good projects have already been identified and interest rates are low. We could speed up the electricity transition by decades.
Shifting from fossil fuels to electricity is climate-friendly, but serious cooks don't think much of electric stoves. Will induction cooking finally catch on as an alternative?
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With its Energiewende (energy transition) Germany has, in the last decade, advanced policy initiatives that have shaken up the energy sector, and this has provoked a range of responses amongst the German populace. Whether it's their concern for their environment, their pocketbooks or their relations with neighboring countries and those around the world, this issue is one which strikes deep chords in the political consciousness of this country.
At issue in this debate is the relationship between the effect that the German government's policies have on climate change and the effect they on the average German citizen. As a leader in the effort to fight climate change, Germany has fostered technological innovation. Its policy initiatives are bringing about a paradigmatic shift in how energy is generated, distributed, and consumed, but this change has meant higher energy bills for German consumers, and according to some, a risk to the competitiveness of German industry stemming from the high cost of power.
According to the Economist, "About half of an average consumer's bill now goes to taxes and subsidies for renewables rather than the actual price of electricity." In a time of economic uncertainty this factor is given added weight.
This concern for energy policy on the part of the average citizen has been around for a long time in Germany. Ever since the 1970's, a grass-roots movement has been underway to end nuclear-power generation, and after the Chernobyl accident in 1986 and, most recently, the disaster at the nuclear power plant in Fukushima, the popular pressure forced Angela Merkel to address this issue.
Her government has set the goal of shutting down all nuclear reactors by 2022. In order to compensate for the loss of production, the Energiewende includes another goal: for Germany to get 80% of its energy from renewable sources by 2050. One of the challenges in moving toward a power generation system based on renewable energy is the transmission of that energy once it is generated. This will require the construction of a huge new system of "power superhighways" as they are called.
These political and technological factors serve to make this ambitious energy transformation a difficult proposition. This uncertainty along with the higher bills paid each month by consumers means that Germans are taking on a degree of risk and expense that, when compared to what other countries are doing to tackle climate change, may make them feel uneasy.
The presence of nuclear reactors in neighboring countries, such as France and the Czech Republic, ensures that at least some of the risk associated with the nuclear power generation will remain even after Germany has shut down its own plants, and the less-than-stellar environmental performance of much larger countries like China and the U.S. serves as a comparison to the efforts their own country is making.
So far polls show that, despite the higher costs that Germans are currently paying, the promise of a "democratization" of the energy grid, encouraged through "feed-in tariffs", which provide incentives for private individuals, co-ops, and municipalities to generate electricity, is enough for Germans to remain in agreement with their governments policies. The upcoming elections in September 2013 will give us an even better idea of what they are thinking.
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According to the Administration on Aging (cited throughout this post), the population of seniors in the United States in 2013 was 44.7 million, up from 40.3 million in 2010. Considering that there are approximately 318 million people in America, seniors make up a significant portion of the population. Because of the incredible medical advances we’ve made, people are living to older ages, which means the population of seniors will only grow.
In fact, according to the United States Census Bureau, the population of people aged 65 and over is projected to be 83.7 million in the year 2050. And yet, society is not necessarily built for them. Public transportation, healthcare and housing are all examples of areas that society could improve upon to accommodate the growing senior population.
How can we make these areas more senior-friendly?
Public transportation in Illinois currently offers a great program called Seniors Ride Free. While this is a wonderful service, it’s not the end-all and be-all for seniors. According to The Beverley Foundation, there are “5 A’s of Senior-Friendly Transportation.” They are:
In order for seniors to truly be able to take advantage of the public transport system, wherever they are located, buses and trains must run at times that are convenient for them, must be easy to board, and must be wheelchair accessible.
Many seniors report being happy with their healthcare – but they also report that it is expensive. As of 2013, older consumers spent an average of $5000 on out-of-pocket health expenses, while the total population spent an average of $3600.
The medical expenses of seniors are higher than the general population because seniors tend to have more health issues than younger people; 23% of people age 75+ reported 10 or more doctor visits in one year, as opposed to 14% of people between ages 45 and 64.
If health insurance companies could find a way to ease the financial burden that medical expenses inflict on seniors, that would be a step in the right direction.
The rising cost of living presents a housing dilemma for many seniors. Because they spend so much on medical bills, many need to turn to their children for financial help when it comes to housing. Many seniors also reach their golden years and realize they haven’t saved enough money for retirement to live in the type of housing facility they would like (such as a retirement community or nursing home).
To help seniors with housing, organizations and companies can help them come up with better retirement plans – ones that take inflation into account – so that they can be better prepared for their future. In turn, pressure can be put on assisted living facilities and the like to make their prices more affordable for the growing senior population. Until then, more and more people turn to services like Abcor for the more affordable home care option.
Above all, the main area in which society can help seniors age better is in the area of respect. As people get older, they imbibe society’s conscious and unconscious message that young is good, old is bad. If society as a whole would realize that tremendous experience and knowledge that seniors have, we could learn from them instead of casting them aside. That would be a win-win situation.
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What is the circular economy?
The circular economy is an alternative system to the current economic system. What society is doing today is extracting-producing-consuming-throwing away, and this current system is destroying our ecosystem, eventually leading to a disaster for people.
Mauritius is vulnerable to climate change (https://www.unep.org/news-and-stories/story/reducing-climate-change-and-disaster-risk-mauritius) and our landfill, Mare Chicose, is almost full, so we need to take a look at how we can do things differently.
When we look at nature, things work in cycles. Water evaporates to form clouds, it rains, and water goes back to where it came from. Plants come from the soil, they grow, their leaves fall and provide nutrients to the soil, another plant can grow. The circular economy is a way to make our life imitate what nature has been doing for centuries.
- Products are manufactured with little thought to what will happen after its purchase. Focus is on profit: What will sell the most for the least cost?
- Products are designed to be replaced quickly (planned obsolescence).
- The main goal is to make products with high market demand at an effective cost.
- Products are from the start designed to make them easy to repair/compost/upcycle.
- Products are kept in use as long as possible, making them cycle back instead of following a straight line to the landfill.
- Products are made so that they can have a good impact on nature – just like a dead leaf can restore the soil.
The success of today’s economy is measured by the value of goods and products, in other words how much money is being made. The ecological and social effects of how that money is being made or who is making that money (is it being fairly distributed?) are not part of the equation.
The aim of the circular economy is to broaden what is measured in the equation of a successful economy to include environmental and social health.
To transition from a linear to a circular approach, there is a radical shift we all need to make: Towards collaborating, towards demanding better products from manufacturers, towards demanding better policies from our government. We can also exit the current economy where we can and join movements: https://www.ellenmacarthurfoundation.org/join-in .
The circular economy is a great way to bounce back from covid’s effect on our economy: it would be a way to create jobs, to put Mauritius back on the map, to make sure that we transition to an economy where everyone can thrive, including our kids.
For more info:
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The terms “financial literacy” and “financial wellness” are often used interchangeably, but these are two very specific financial terms that do not mean the same thing.
Financial literacy is the understanding of financial terms and concepts, but merely understanding finances will not ensure that your students are financially well.
Financial Wellness Defined
A financially literate student is one who understands such things as compound interest or how credit cards work.
If asked, they could tell you how their student loans work and when they will need to begin repaying those loans.
Such a student might be able to explain good credit and why it is necessary to establish good credit during their college years.
Without a doubt, having this knowledge would put your students well ahead of their peers.
A recent study1 found that, on average, college students could only answer two out of six basic financial questions correctly.
These questions included what to do if you had too many credit cards, how much you should have in emergency savings and information about student loans.
However, the same survey found that just because students understood financial concepts, they were not financially well, as was evidenced by their overall stress score.
This is because financial literacy is just one part of financial wellness.
Financial wellness encompasses the entire financial picture.
- Do students understand when repayment on student loans begins?
- Have students determined the appropriate amount of loans for the occupation they’ve chosen?
- Do they not only understand how credit cards work, but do they also pay off their credit cards each month to avoid paying high-interest rates?
- Do they have a plan of action for meeting monthly expenses and have an emergency fund in case circumstances change?
Your students are only financially well if they have:
- The tools needed to create a financial plan of action
- Real-world strategies and tactics for saving, borrowing, and spending
- Less financial stress because they are managing their resources and meeting their financial obligations, including longer-term goals.
Financial wellness includes the following four components: Literacy, personal assessment, behaviors, and planning.
#1: Financial Literacy Comes First
Students need to have a foundation in financial terms and concepts to have the required knowledge to make good financial decisions.
Holistic financial wellness programs like iGrad include financial literacy curriculum in the following categories:
- Types of: This includes such things as loans, insurance products, and banking products like checking or savings accounts
- How to: For example, making a budget, balancing a checkbook, qualifying for a loan, and opening a checking account
- What is: Students will learn about credit reports, costs of higher education, student loan information, and how credit cards work
Once these topics and concepts are well understood, students must be given the appropriate skills and strategies to put these concepts to work in their own lives.
It is only when students can apply financial knowledge that they can become financially well.
#2: Student Financial Assessment
Every student comes from a different background and financial history, which is why a student financial assessment is an important step.
Your students cannot get where they are going if they don’t know where they are.
iGrad can help students:
- Determine their money personality
- Analyze their current financial wellness trends
- See a snapshot of their student loan debt
These assessments can help students make financial priorities based on their unique situations and become mindful about when and how they spend, save and borrow.
Through such assessments, students become aware of their current financial behaviors and can work to become less impulsive when making financial decisions.
Financial wellness occurs when students manage their money instead of their money managing them.
#3: Creating Positive Financial Behaviors
Students from all socio-economic backgrounds can have poor financial behaviors.
Financial beliefs and biases have nothing to do with how much money a person has.
When a student has the opportunity to spend money on a night out with friends or save the money in emergency savings, they will make the decision based on their beliefs about money.
While financial literacy education provides knowledge, it doesn’t change behavior. In fact, a 2014 study2 found that financial literacy alone changed financial behaviors by just 0.1 percent.
Students only change behaviors when they are motivated to do so.
This can be fear or reward: Fear of a negative consequence like being kicked out of their apartment for nonpayment or a reward like some kind of incentive.
So, instead of just financial literacy concerning savings accounts, students need to be given the strategies to start saving and understand how to make saving a habit.
When combined with an incentive, good financial behaviors become ingrained.
iGrad helps students learn the right strategies through courses and access to one-on-one counseling.
Additionally, iGrad’s platform has gamification which allows colleges to provide points and awards for students who complete certain modules or goals, enabling them to provide incentives to students who participate in the program.
To learn more about the importance of holistic financial education, check out Why is a Holistic Approach Important When Integrating College Financial Education?
#4: Financial Planning Is a Must
If a student fails to plan, they can plan to fail. A financially well student will have the following plans in place:
- Monthly budget
- Expense reduction
- Debt reduction
- Emergency savings
- Student loan planning
iGrad can help your students determine how long it will take to get out of debt or how long they will carry student loan debt given the loan amount and interest rate.
Although financial literacy is important, it is only part of the picture.
It is only when a financial wellness program addresses literacy, personal assessment, behaviors, and planning that students can achieve real financial wellness.
1 - https://everfi.com/wp-content/uploads/2019/05/MoneyMatters-2019.pdf
2 - https://www.researchgate.net/publication/259763070_Financial_Literacy_Financial_Education_and_Downstream_Financial_Behaviors
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India is a developing country. It has great resources, time, capital and labour to produce the finest services in the world. it is one of the fastest growing countries in the world. this is achieved because of the incentives, opportunities and favours given to the citizen for growing and nourishing in their respective field. These incentives and subsidies provided has helped in the overall development of the economy in a great scale.
What is a startup?
Many people are yet not familiar with the concept of start-ups. It is a great initiative, started by the Indian government. It is basically a culture of starting your own business through helps from the government. The work of the start-ups usually involves the work of development or innovation and not just pure business. The total turnover of the business or start-up should not be more than 25 crore for the preceding financial year. Furthermore, such business should also not be a result of some merger, or break up from some previous business already existing, it should be a new idea working for innovation by an entrepreneur.
Government of India provides some tax benefits to the start-ups to encourage their growth. Such tax benefits can be easily availed by any entrepreneur in India, by showing the right title and documents. Let us look at the tax benefits available.
Tax benefits for startups
1. This is the biggest tax benefit given to start-ups in India, where the start-ups are given exemptions from all the taxes for the first three financial years except the Minimum alternate tax or MAT. If the start-up is registered, and the documents are correct, then every start-up can avail of this benefit. This benefits the owner highly as all the profits earned in the first three years goes back into the business without any loss due to taxes. It helps the start-up to grow fast without any impediments. This is a great initiative by the government of India. there is a whole hundred percent exemption for the first three years of the start-up which will eventually help the profits to go into the pockets of the owner, who can further use it into the development of startup itself.
2. Another tax exemption given by the government of India is an exemption from the capital gain tax for the start-ups. The start-up which is registered and raises up its funds through shares and other such measures which is very common in business today, can get exemption from paying the taxes on profits earned through capital gains. This capital gain tax exemption is available up to twenty percent on the capital gain. So an entrepreneur can get up to twenty percent of the exemption on capital gain. It is a very innovative way to boost the growth, as the start-ups that raise their funds often find themselves mingling through capital gain taxes throughout the year. Entrepreneurs in start-ups can get exemption and avail the benefit. Such exemption encourages raising capital through capital means such as issuing shares in the stock market. It encourages growth and creativity of the startup, and also helps in raising capital easily without any impediment.
3. Another great step taken in the last few years is the abolition of angel investment tax. Angel investment is the kind of investment which is done by an acquaintance of the owner. Usually, when a new startup is opened, there is not much goodwill or trust regarding it in the market. This makes it difficult for the owner to raise fund through loans and other financial institutions. A person who is a novice finds this type of investment very profitable. The interest and profits are given accordingly to the angel. The government charged taxes on such investment also, but with the new taxing provisions, such taxing provision has been abolished for the new entrepreneurs in India.this helps the new owners who have stepped into the business world recently and wish to revamp their business through their profit without being burdened by the taxes immediately. This was abolished during the last budget session, which was included in the taxes law now. it has helped the entrepreneurs in India to a great extent, as they can now take investment from their family and relatives, without providing any tax on it.
4. This is not basically a tax emption, but a kind of help given by the government of India to the new entrepreneurs by the way of financial aids. It is called FoF or the fund of funds which initiates a delivery of some initial capital fund to the entrepreneurs for the purpose of opening up a new startup. This boosts the development of all start-ups that nag due to lack of funds initially.
With the advent of time and technology, it has become very important to use it efficiently. The best way to use the resources efficiently is through innovation. The government by offering these tax evasions and exemptions to the start-ups has taken a great initiative as it is helping the new people in entering into the business world without worrying about losses or funds. The combined effect of these provision makes it very easy for any person to open up a start-up and run it efficiently. India needs for provisions like this for the new innovation, so that more and more talent is converted into efficient skill, and helps in the growth of Indian economy eventually. The government of India has been providing these tax benefits since past few years through its start-up India programme. This programme has up till now helped a lot of new entrepreneurs in India, and is also planning to help many more. The funds transferred to the new owners help them build up, and the tax exemptions help them continue the growth without cutting on the profits. It has combined effected the startup culture very much, and will eventually lead to an environment of great innovation and creativity.
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What is the International Fisher Effect (IFE)?
The International Fisher Effect (IFE) states that the difference between the nominal interest rates in two countries is directly proportional to the changes in the exchange rate of their currencies at any given time. Irving Fisher, a U.S. economist, developed the theory.
The International Fisher Effect is based on current and future nominal interest rates, and it is used to predict spot and future currency movements. The IFE is in contrast to other methods that use pure inflation to try to predict and understand movements in the exchange rate.
How the International Fisher Effect was Conceptualized
The International Fisher Effect theory was recognized on the basis that interest rates are independent of other monetary variables and that they provide a strong indication of how the currency of a specific country is performing. According to Fisher, changes in inflation do not impact real interest rates, since the real interest rate is simply the nominal rate minus inflation.
The theory assumes that a country with lower interest rates will see lower levels of inflation, which will translate to an increase in the real value of the country’s currency in comparison to another country’s currency. When interest rates are high, there will be higher levels of inflation, which will result in the depreciation of the country’s currency.
How to Calculate the Fisher Effect
The formula for calculating the IFE is as follows:
E = [(i1-i2) / (1+ i2)] ͌ (i1-i2)
- E = Percentage change in the exchange rate of the country’s currency
- I1 = Country’s A’s Interest rate
- I2 = Country’s B’s Interest rate
Let’s take the example of two currencies, the USD (the United States) and the CAD (the Canadian Dollar). The USD/CAD spot exchange rate is 1.30, and the interest rate of the United States is 5.0%, while that of Canada is 6.0%.
Based on the IFE assumption, the country with a higher interest rate, Canada in this case, will see a higher inflation rate and will experience a depreciation of its currency. The future spot rate is calculated by taking the spot rate and multiplying it by the ratio of the foreign interest rate to the domestic interest rate, as shown below:
1.3 x (1.05/1.06) = 1.312
Given the future spot rate, the International Fisher Effect assumes that the CAD currency will depreciate against the USD. 1 USD will be exchanged into 1.312 CAD, up from the original rate of 1.30. On one hand, investors will receive a lower interest rate on the USD currency, but on the other hand, they will gain from an increase in the value of the US currency.
For the IFE to work, several assumptions must be in place. There must be the free flow of capital between countries, the integration of capital markets, and the lack of control on the currency for trade purposes.
The Relevance of the International Fisher Effect
In the short term, the International Fisher Effect is seen as an unreliable variable of estimating the price movements of a currency due to the existence of other factors that affect exchange rates. The factors also exert an effect on the prediction of nominal interest rates and inflation.
However, in the long run, the IFE is viewed as a more reliable variable to determine the effect of changes in nominal interest rates on shifts in exchange rates.
Fisher Effect vs. International Fisher Effect
The Fisher effect describes the relationship between interest rates and the rate of inflation. It proposes that the nominal interest rate in a country is equal to the real interest rate plus the inflation rate, which means that the real interest rate is equal to the nominal rate of interest minus the rate of inflation.
Therefore, any increase in the rate of inflation will result in a proportional increase in the nominal interest rate, where the real interest rate is constant. For example, assume that the real interest rate is 5.5% and the rate of inflation changes from 2.5% to 3.5%. The nominal interest rate is calculated as follows:
(1 + Nominal Interest Rate) = (1+Real Interest Rate) (1+Inflation Rate)
Nominal Interest Rate = (1+0.055) (1+0.025) – 1
= (1.055) (1.025) – 1
= 0.081 or 8.1%
Nominal Interest Rate = (1.055) (1.035) – 1
= 0.092 or 9.2%
Therefore, the nominal interest rate would’ve increased from 8.1% when the inflation rate was 2.5% to 9.2% when the rate of inflation increases to 3.5%.
The International Fisher Effect expands on the Fisher Effect theory by suggesting that the estimated appreciation or depreciation of two countries’ currencies is proportional to the difference in their nominal interest rates. For example, if the nominal interest rate in the United States is greater than that of the United Kingdom, the former’s currency value should fall by the interest rate differential.
CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)® certification program, designed to transform anyone into a world-class financial analyst.
To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below:
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In line with its company purpose and its transformation strategy, BNP Paribas offers an...
First appearing in the 1970s, microfinance enables low-income populations, especially those residing in developing countries, to benefit from access to financial services (e.g. loans, savings, insurance, money transfers, financial education, etc.). How does it work? Simply put, donors distribute microloans to support the development of small economic projects, such as an entrepreneurial initiative or the purchase a manufacturing tool. Microloans like these are usually granted by microfinance institutions (MFI).
At BNP Paribas, we have made financial inclusion and social entrepreneurship key commitments in our corporate social responsibility (CSR) policy, in line with Sustainable Development Goals 1, 2, 5, 8, 10 and 17. That’s why we grant loans to microfinance institutions, so that they in turn can offer microloans to disadvantaged populations who are excluded from the traditional banking system.
BNP Paribas’s support for microfinance includes:
Financing projects, restoring hope
“Lasting peace cannot be achieved unless large parts of the population find ways to break out of poverty […] Microcredit is one such means.” That is how Ole Danbolt Mjoes, President of the Nobel Committee, presented the 2016 Nobel Peace Prize to Mohammed Yunus, for his unusual bank project .
As the son of a jeweler in Bangladesh, Mohammed Yunus studied economics in the United States before returning to his home country, one of the poorest in the world, to offer aid to disadvantaged populations. In 1976, he created Grameen Bank, an institution that still today delivers microloans ($130 on average) with no financial guarantee to the poorest populations, including those residing in the most remote regions of his country (Grameen means “village” in Bengali).
Lasting peace cannot be achieved unless large parts of the population find ways to break out of poverty.
Microfinance institutions and banks: joint action in favor of micro-entrepreneurs
Microfinance institutions operating in various forms (associations, NGOs, mutual funds, cooperatives, commercial businesses, banks, etc.) issue microloans to those excluded from the traditional banking system. MFIs also deliver non-financial services to their customers. They may subsidise their family’s urgent needs, support their mobility for employment or offer training. Revenue generated by the economic activity of micro-borrowers allows them to repay their microloan.
Most MFIs finance their loans exclusively from their own borrowing. That’s why loans granted by classic banks like BNP Paribas are so important: they enable microfinance institutions to maintain their activity.
Between 2015 and 2018, BNP Paribas’s outstanding sums in the microfinance sector increased by 19%. BNP Paribas has indeed strengthened its commitment in favor of microfinance by developing solidarity savings funds intended for BNP Paribas customers or employees of major groups. These funds invest a small portion of sums in social enterprises like MFIs. That is notably the case with BNP Paribas Asset Management. Through its support of ADIE, Initiative France, Acted, Sidi and other major microfinance companies in France, it has supported 21,909 microenterprises in 2018, including 64% receiving continuous funding over three years.
BNP Paribas also offers its people's expertise for technical assistance missions. In 2017 we set up methodology frameworks to assess social performance (Cerise SP14). They are a one-week exercise sent to the Group's MFI partners to carry out a Pro Bono audit.
Esther - South Africa
Pan & Qi xin - China
BNP Paribas takes action for emerging countries
Brazil, Colombia, China, Ivory Coast, India, Senegal, South Africa, Tunisia, Morocco and Vietnam: BNP Paribas finances a portion of the microloan portfolios of MFIs in these developing countries. Aside from MFI loans, the Group also finances the RIF II Fund, which invests in 26 MFIs.
We play an indirect role in providing greater financial inclusion and improving the living conditions of almost 320,000 people who have used this loan to create a microenterprise or invest in the purchase of a lasting asset.
We play an indirect role in providing greater financial inclusion of almost 320,000 people in these countries.
In India, where the need for microfinancing is massive (the country accounts for 21% of micro-borrowers worldwide), the Group supports 11 MFIs, all of which focus exclusively on women. Our loan commitments have increased by 61% from €47.6 million in 2016 to €77.1 million in 2018. An impact study carried out in 2015 for the MFI Ujjivan showed that 73% of customers contribute to savings every month and 65% play a more active role in making their family’s decisions.
(*) Source: IMPROVE 2016 study
Nga - Vietnam / Deisy - Colombia / Gudiya - India
Microfinance in developed countries: a powerful lever for financial inclusion
Microfinance also helps vulnerable populations in mature economies. In Europe and the United States, for example, the Group’s support for microfinance institutions helps boost the financial credibility of people living in rural areas and/or excluded from the traditional banking system. The financial support and education they receive encourages their reentry into the workforce. The Group is an active member of EMN and E-MFP, two major networks that support microfinance in Europe. Throughout 2016, several major advances occurred:
- In France, the Group structured the first Social Impact contract in France on behalf of ADIE, for a total of 1.3 million euros.
- In Italy, PerMicro, the country’s 1st MFI, which is financed and owned at over 20% by BNL, revealed through a study carried out by Università Politecnico that 51% of customers receiving support obtained financing from “classic” banks in the three years following their first microloan, demonstrating their financial inclusion. Permico has given 700 entrepreneurs and 2,700 families access to banking over the past 8 years.
- In Luxembourg, BGL BNP Paribas founded MicroLux, the first MFI in Luxembourg, by providing 83.3% of its capital.
- The Group has also invested in the Belgian Helenos Fund, which underpins MFI capital in European countries.
Follow our news
On February 26th, International Financing Review (IFR) awarded BNP Paribas with several honors...
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This article revisits global projections made in 1981 of eight metallic and fertilizer minerals for the year 2000. The principal objectives of the present study are to quantify the differences between the projected and observed levels of consumption for the year 2000 for eight of the 26 non-fuel minerals covered in the earlier study, and, then, to attempt to attribute these (often) large differences to the major determinants of minerals demand: income, technological, regulatory and other public policy changes, and changes in the recycling rates of the metallic minerals. The eight minerals are: aluminum, copper, iron, mercury, nickel, phosphate rock, potash and tin. This follow-up study begins with a discussion of the need for long-term projections of minerals. This section also includes a summary of the major determinants of the long-term demand for, and supply of, minerals, and a review of some of the earlier assessments of mineral needs and availability. Section 3 of the article begins with a short summary of the World Input-Output Model, the main methodological tool used in the earlier study that was developed by Prof. Wassily Leontief, the 1973 Nobel laureate in economics, and the way in which non-fuel minerals were represented in that system. This section also provides a summary of other global modeling efforts of non-fuel minerals that were carried out at a similar point in time for a similar interval. Section 4 presents the actual population, GDP and per capita GDP changes over the 1970-2000 time interval compared with the projected rates for these important determinants of mineral use, along with the projected and observed growth rates of minerals consumption for the eight non-fuel minerals included in this study. When the projections are compared to the observed global consumption rates for the year 2000, the differences range from +43% for nickel to +229% for potash. Section 5 discusses the apparent reasons for the differences between the projected and observed global consumption rates of these non-fuel minerals that include differences in the growth of GDP and GDP per capita, changes in recycling rates (for the metallic minerals), technological change, and regulatory or other public policy changes that have affected mineral use over the 30-year-interval ending in 2000. In light of the data and analysis presented in Sections 4 and 5, the article concludes with some remarks, made almost a quarter of a century ago, by Prof. Leontief on the need and justification for long-term projections.
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Siemens, basically the General Electric of Germany, has a lot of stake in renewable energy, from generators to energy storage.
Siemens recently started a supercapacitor regenerative braking project in Portland. It helps to reduce the demand and spiking that occur when light rail locomotives accelerate and decelerate quickly, as they have to do at every stop. The same kind of technology helps to reduce the load on the grid by recovering energy that might otherwise be wasted. Recovering waste energy is especially important in renewable energy systems to keep the flow of energy constant in spite of fluctuating energy generation.
Sometimes, when confronted with the higher upfront costs of renewable energy, consumers and politicians balk. When people see price tags, they often don’t understand what those upfront costs mean. Utility providers understand this, but when it trickles down to the higher price that the consumer might pay for renewable energy, it could become a concern. What they don’t understand is that they can actually be supporting new jobs and a cleaner environment by changing over to renewable energy.
What’s the best way to help people understand other than to educate them? Not everyone understands or even wants to look at a sheet full of numbers to determine which renewable energy program might be worth looking into when compared to other energy sources. Siemens’ new online game, Power Matrix, is a Sims style game that teaches how various technologies can work together, providing reliable, and profitable, energy.
Why not give it a try and see what you can learn about balancing renewable energy in your neck of the woods? Don’t worry, you don’t need to be an expert, but that’s the whole point. The more we understand the economics of renewable energy, the more we’ll we willing to accept paying a little more for it up front.
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Author: Ayat Khursheed, Student at Bennett University.
Co-Author: Shambhavi Srivastava, Student at Bennett University.
Contracts and agreements that come under the periphery of the sale of goods are governed under the Sale of Goods Act 1930. This act basically came into effect on the 1st of July, 1930 in India. The various provisions of sale of goods act the act talks about a contract of sale. The basic thing in such agreements is that the seller transfers or agrees to transfer the property to goods to the buyer for a price, it elucidates that the basic requirement of such contract shall be absolute or conditional. The sale of goods act enumerates a difference in between sale and an agreement to sale. Sale is where a good is transferred from one party (seller) to another (buyer) the contract is sale however when the goods are transferred but the approach is futuristic or can be fulfilled under certain terms and conditions it is an agreement to sell. An agreement changes from an agreement to a sale when all the conditions are fulfilled and the property is transferred.
The following must be fulfilled:-
- A contract
- In such contracts, there must be transfer or agrees to transfer the property in goods to the buyer,
- This transfer must have consideration or a price
- Sale may be made between one part-owner
DOCTRINE OF PRIVITY
Section 2(h) of the Indian contract act 1872, a contract is an agreement between two parties that is valid and enforceable by law and is backed by some consideration. The doctrine of privity is a common law principle and it clearly states that only the parties to the contract can act as enforcing bodies in a contract and nothing else only these parties have the exemplary right to sue each other to enforce their rights liabilities and various obligation and anybody who is exclusive or is not a party to the contract or a stranger party to the contract is not allowed to confer obligation no stranger is allowed to confer any rights and obligation and this cannot be the case even though the contract is made or entered into for their own benefit. The basic idea of such a doctrine ‘Interest Theory’ which clearly entails that the person who has entered into the contract is entitled and has full power to protect his own rights and obligations as per law to protect his own rights. For example, if I make an agreement to sell my car to Annika and if I breach the contract then in that case Ms. Annika has the right to bring a case against me or try to enforce her rights and obligations and no other person other than Annika can sue me.
- Role of Consideration in privity of contract
As we all know that the consideration is the most essential or vital element of any contract without consideration a contact is void. The term consideration is enumerated in Section 2(d) of the Indian contract act 1872 consideration is a very basic foundation of every contact and it is the basis essentiality of a contract.
Essentials to the privity of contract
- A contract that has been entered into between two parties
- Parties must be competent should be valid consideration
- There has been a breach of contract by one party
- Only parties to contract can sue each other
APPLICATION OF THE CONCEPT OF PRIVITY IN SALES OF GOODS ACT ELUCIDATED WITH LANDMARK JUDGEMENTS
Section 44 of sale of Goods Act 1930
Liability of buyer for neglecting or refusing delivery of goods- in this case when the seller has complete readiness and willingness todeliver the particular goods and following this expects the buyer to take delivery of the goods the only circumscribing factor is that he must do this within a particular time that may not be specified but shall be reasonable enough if this is not the case the buyer is liable and is under obligation with the seller for any kind of loss or negligence so occurred and for the refusal to do this in the reasonability of time and he must also maintain and can be charged for care and the custody due to the mere possession of goods. In the instant case matter
Section 54(2) of the sale of Goods Act 1930
The said section deals with the rescaling of the goods, upon few conditions applied. The resale can only be initiated if the goods involved are preshiable or it has been expressed that the seller has the right to sell the goods if there is no payment or default on the part of the buyer. He can also resell if he has retained the goods in transit and further given notice to the buyer about the reselling.
National small industries corporation limited v Ram Chandra ragunath joshi
The plaintiff and the defendant entered into an agreement where plaintiff agreed to supply the machine to the defendant, who in-turn had been negotiating with a third party to supply them the said machine upon receiving it from the plaintiff. However, the defendant denied to the delivery of the said machine and in order to recover damages the plaintiff filed a suit against the defendant.
The defendant took on an defence that the plaintiff cannot sue them directly as they were acting in accordance to the third party and it was the third party, whom the plaintiff had to sue for the damages and not them.
It was held by the court of law that the effect of the delivery upon the third party doesn’t dismay the privity within the defendants and the plaintiff and moreover the agency on part of the defendants for the third party was not stated anywhere. This arrives to a conclusion that even though the purpose of the contract effected the third party not the one entering into it, It cannot be contented that there is no contract of privity within the parties of the contract.
Section 27 of the sales of goods act 1930
(Section 27 )Sale by person not the owner – under this provision where goods are sold by a third person explicitly is not the owner or is a stranger who does not have authority or with the consent of the owner the buyer can never have a better title than the seller and the owner has supreme role in terms of the title.it is so important that the buyer does this in good faith .
Section 61 of the sales of goods act 1930
(Section 61 ) interest by ways of damages and special damages- it explicitly states that the section has no restriction on the seller or the buyer in order to take his damages and counter their rights however, here it talks about the absence of the contract the court here comes in to supreme picture and has absolute right to award the interest it deems fit for the same
Sukhjit Starch and Chemicals Ltd. Vs The Union of India (UOI) and Ors.
The plaintiff had already paid for the maize belonging to an Argentine company that was to be allocated by the government, but he only received a part of the maize and not the whole amount which was intended. After the partition it was informed to the plaintiff that the amount left, that was to be delivered to the plaintiff will not be delivered to him as the allocations have been cancelled by the government of East Punjab. Moreover, the company to whom the maize belonged were asked to deal with the plaintiff separately, even though the allocation was under the control of the government. The plaintiff company filed a suit against Union of India and Government of Punjab.The defence pleaded by the Union of India and Government of Punjab was of, no existence of privity between the defendant parties or with the plaintiff.
It was held by the court of law that there existed a privity between the plaintiff and the government even though the subject of the contract that was, the maize, belonged to a Argentine Company, it was said so by the court because, the bidding and the amount paid or the allocations were all done according and in presence of the government officials. The cancellation of allocation or transfer was under the control of the government. The government shared a full control and further stopped the transfer of maize to the plaintiff. Even though the maize belonged to the other company and the plaintiff was to procure the maize from them but government had attained control during the emergency, hence formulating new decisions regarding sale, allocation, purchase or delivery of the goods. Therefore, the company had performed it’s part of the bargain and being the privies of the contract due to above reasons, the government was entitled to pay the damages or compensation claimed.
WARRANTY PAVING A PATH FOR PRIVITY
The doctrine of privity can also be applied to the relationship of manufacturer and consumer. Warranty constitutes to be a part of sales of goods and it can be observed that a consumer enters into a contract of privity with manufacturer because he provides a warranty to the services and products that are produced by him and the warranty travels from him to the seller, retailer and then to the consumer.
It can be understood that the importance of the doctrine of privity is an essential topic to be dealt with, even if the definition of the same is narrow it has absolute wide outreach. The doctrine of privity is a principle in which only parties to the contract can implement their rights. The accountabilities arising out of the doctrine and along with the interest theory, the knowledge of sale of goods law and its legislation would help a business to flourish and understand various contractual obligation. which will entail the parties suffer no injustice and loss. It makes party obliged to perform their part of the bargain as it ensures fulfilment of one’s liability in a contract, even though it’s not visible at forts glance of the contract.
- Indian Sale of goods act 1930
- Indian contract act 1872
1994 (4) BomCR 598
(1961)ILR 2Punjab and Haryana71
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Global Illicit Trade Environment Index
The Global Illicit Trade Environment Index is commissioned by the Transnational Alliance to Combat Illicit Trade (TRACIT) and produced by The Economist Intelligence Unit (EIU). The Index evaluates 84 countries on their structural capability to guard against illicit trade, highlighting specific strengths and weaknesses.
The objective of the Global Index is to improve the knowledge and understanding of the regulatory environment and economic circumstances that enable illicit trade. The research findings are valuable to (1) inform governments on the effectiveness of their efforts to fight illicit trade; (2) establish policy priorities and identify areas that merit greater attention; (3) encourage governments to strengthen their legislative and enforcement measures to combat illicit trade; and (4) provide companies and organizations with tools and messages to raise awareness and mobilize resources against illicit trade.
EIU Global Report and Regional Briefings
Building on the Index data, the EIU has published several papers that cover the global and regional results, focusing on how economies score on the Index, and delving into which regional economies are taking the most action, and which ones are doing little to address this issue.
TRACIT Policy Recommendations
TRACIT has prepared a set of policy recommendations inspired by the thematic categories upon which the Index was constructed. The recommendations are universal in nature, providing a “checklist” of fundamental measures governments can implement to improve their ability to defend against illicit trade.
SERBIA, BOSNIA AND MONTENEGRO
FREE TRADE ZONES
UNITED ARAB EMIRATES
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- How did electrification changed life in the 1920s?
- How the 1920s led to the Great Depression?
- Who did not benefit from the economic boom in the 1920s?
- How did the economic boom during the Roaring Twenties changed consumers?
- What was the economic boom?
- Why was the 1920s so important?
- How did the first world war lead to an economic boom?
- Who benefited most from the economic gains of 1920s?
- Why was the economy so good in the 1920s?
- What were some of the economic problems from the 1920s?
- What caused the economic depression of 1920 21?
- What was the 1920s known for?
- What were the effects of the economic boom?
- How far did the US economy boom in the 1920s?
- Did the Roaring 20 caused the Great Depression?
- What was the biggest industry in the 1920s?
- What were two reasons for the economic boom of the 1950s?
- What were the boom years?
How did electrification changed life in the 1920s?
Electricity played an integral role in the development that took place in the 1920’s.
It generated all the electrical devices and helped people get work done much faster and more efficiently, which gave them more time to enjoy life and to get out of the house..
How the 1920s led to the Great Depression?
It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers.
Who did not benefit from the economic boom in the 1920s?
For many Americans, the 1920s was a decade of poverty. More than 60 per cent of Americans lived just below the poverty line. Generally, groups such as farmers, black Americans, immigrants and the older industries did not enjoy the prosperity of the “Roaring Twenties”.
How did the economic boom during the Roaring Twenties changed consumers?
How did the economic boom during the Roaring Twenties change consumers, businesses, manufacturing, and marketing practices? Consumers: After the war, Americans were ready to buy and wanted consumer goods like cars and appliances. … Reducing the time to produce automobiles reduced the cost as well.
What was the economic boom?
An economic boom is the expansion and peak phases of the business cycle. It’s also known as an upswing, upturn, and a growth period. During a boom, key economic indicators will rise. … Most leading economic indicators have already turned positive before that. The cause of a boom is an increase in consumer spending.
Why was the 1920s so important?
The economic boom and the Jazz Age were over, and America began the period called the Great Depression. The 1920s represented an era of change and growth. … The decade of the 1920s helped to establish America’s position in respect to the rest of the world, through its industry, its inventions, and its creativity.
How did the first world war lead to an economic boom?
But a 44-month economic boom ensued from 1914 to 1918, first as Europeans began purchasing U.S. goods for the war and later as the United States itself joined the battle. … Entry into the war in 1917 unleashed massive U.S. federal spending which shifted national production from civilian to war goods.
Who benefited most from the economic gains of 1920s?
White industrialists such as Henry Ford profited massively during the 1920s, as the post-World War I economic boom fueled consumption and mass production just as it had during the Gilded Age following the Civil War.
Why was the economy so good in the 1920s?
The main reasons for America’s economic boom in the 1920s were technological progress which led to the mass production of goods, the electrification of America, new mass marketing techniques, the availability of cheap credit and increased employment which, in turn, created a huge amount of consumers.
What were some of the economic problems from the 1920s?
Overproduction and underconsumption were affecting most sectors of the economy. Old industries were in decline. Farm income fell from $22 billion in 1919 to $13 billion in 1929. Farmers’ debts increased to $2 billion.
What caused the economic depression of 1920 21?
Factors that economists have pointed to as potentially causing or contributing to the downturn include troops returning from the war, which created a surge in the civilian labor force and more unemployment and wage stagnation; a decline in agricultural commodity prices because of the post-war recovery of European …
What was the 1920s known for?
The 1920s was the first decade to have a nickname: “Roaring 20s” or “Jazz Age.” It was a decade of prosperity and dissipation, and of jazz bands, bootleggers, raccoon coats, bathtub gin, flappers, flagpole sitters, bootleggers, and marathon dancers.
What were the effects of the economic boom?
A boom is a period of rapid economic expansion resulting in higher GDP, lower unemployment, a higher inflation rate and rising asset prices. Booms usually suggest the economy is overheating creating a positive output gap and inflationary pressures.
How far did the US economy boom in the 1920s?
The 1920s is the decade when America’s economy grew 42%. Mass production spread new consumer goods into every household. The modern auto and airline industries were born. The U.S. victory in World War I gave the country its first experience of being a global power.
Did the Roaring 20 caused the Great Depression?
The Stock Market Crashes! The 1920s, known as the Roaring Twenties, was a time of many changes – sweeping economic, political, and social changes. There were many aspects to the economy of the 1920s that led to one of the most crucial causes of the Great Depression – the stock market crash of 1929.
What was the biggest industry in the 1920s?
The 1920s was a period of great industrial production in America. The automobile, petroleum, steel, and chemical industries skyrocketed in their production during this period.
What were two reasons for the economic boom of the 1950s?
The Rise of Consumerism One of the factors that fueled the prosperity of the ’50s was the increase in consumer spending. Americans enjoyed a standard of living that no other country could approach. The adults of the ’50s had grown up in general poverty during the Great Depression and then rationing during World War II.
What were the boom years?
The period from 1920-29 is often called the ‘Roaring Twenties’ because it was a time of noise, lively action and economic prosperity. The First World War had been good for American business. … This led to a Boom or an increase in the amount of goods being made and sold by American businesses.
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Increasing amount of people contemporarily, who do shopping regularly, is likely to easily find out that majority of products they purchase has been developed by foreign producers. Therefore, here we should be aware of the fact that this kind tendency hasn’t always been something normal. It is indicated by the fact that in the past the expenditures connected with transferring products from one country to another have been so big that this kind chance was only reserved for richer people. Nonetheless, at present due to the quick progress of the technology, trade has become something almost everyone is involved in. It is implied by the fact that nowadays it is rather complex to get to a store, which would have only commodities from only one country.
This tendency has generally advantages, but a lot of us frequently forget about drawbacks of this kind tendency. One of them is connected with the markets being flooded by the poor goods, which due to the liberalization of various laws connected with exchanging products globally, become more and more popular. Hence, we should also not forget that in the field of trade there are also some risks connected with its development. Another one refers to the fact that if a country produces pretty expensively, the local clients would rather prefer to get financially attractive products from another country. Even though it is rational, it also might have a really negative impact on the local economy in the future.
Nonetheless, mostly the intensification of trade has led to considerable progress of significant number of countries. Thus, making this tendency still develop is pretty important. On the other hand we should remember as well as be aware of the fact that this tendency opens up significant of opportunities for producers of substandard products, which may bring a lot of harm to the end-users as well as the economy itself, as the end-users would stop helping and picking local producers owing to having a cheaper alternative available.
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This blog is Part 2 in our series on population dynamics. Check out Part 1 on visualizing aging population here. In this blog, we take a closer look at how India and Japan are aging, and uncover an astonishing trend through population pyramid visualizations.
There has been a lot of discussion on how Japan is dealing with an aging population crisis. The theory of demographic transition says that populations in a country undergo a transition from a period of high birth and death rates to one of lower birth and death rates, as the country progresses economically and culturally. To know more about how this transition actually happens, check out our blog post on aging population. Since Japan is one of the few countries that has currently reached the far end of this transition, it is interesting to see what India can learn from the Japan story.
Population Pyramids for India and Japan
We looked at age-wise population data from the United Nations Department of Economic and Social Affairs (UN DESA) for India and Japan. We first visualized the 2015 data for both countries in the form of population pyramids. A population pyramid (also called an age pyramid or age picture diagram) shows the distribution of males and females of different age groups in the population. The population pyramid is named so because it resembles a pyramid when the population is growing.
A bottom-heavy population pyramid for India suggests a young and growing population. Japan, on the other hand, has a narrow base and wider top, as is typical of an aging population.
UN DESA has published population data for 1950-2015 and medium variant population estimates for 2016-2100. When we analyzed the data for India and Japan, we found an intriguing trend — India is mimicking Japan’s population growth trend, but with a 50 year lag.
What Can India Do?
Japan is facing many consequences of an aging population — low GDP growth, a focus on markets (healthcare, insurance, pensions, and leisure) targeted to older citizens, high cost of child care, and high real estate costs, all amidst the backdrop of low immigration. In addition, there are significant cultural and psychological effects. Japan has seen many people living alone, especially working women and the elderly, and the rise of a “lonely children” dynamic where children do not have siblings. People are postponing marriage to pursue career growth and self actualization, and there is deep unease and fear about Japan’s potential economic collapse and loss of vitality.
Japan is boosting its birth rate by offering incentives in the form of cash, state-supported day care, tuition waivers and so on. Given that India’s population is already bursting at its seams, measures to increase birth rate are out of the question. As per UN DESA data, India’s population in 2015 is 1.3 billion, more than 10 times bigger than Japan’s population of 126.6 million.
What India can do is to ensure that it takes care of its soon-to-be-aging population at retirement. Countries such as Sweden and Poland have now instituted demographically indexed pension schemes to tackle their aging population crisis, which is a huge contributor to the countries’ economic deflation. India has always been a savings-oriented economy, but this is changing with the shift towards a more consumption-based lifestyle. Effective data collection and analysis on individual-level income, savings, and medical expenditure can add great value in urging policymaking in the right direction. Provident Fund accounts and state-provided medical insurance, for instance, can go a long way in ensuring that India’s economy is, at least, better financially prepared for an aging population crisis like the one in Japan.
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The biggest challenge facing nation states in the 21st century is climate change
The Australian Government introduced a Carbon Tax in 2012 to mitigate greenhouse gas emissions and to tackle the serious
environmental problem of climate change. The Coalition Government introduced a Direct Action Plan to replace the Carbon
Tax and to achieve the same goal of greenhouse gas mitigation. Compare and contrast these two policies and evaluate the
likely impacts of both policies on your selected corporate case or a sector by applying the knowledge gained from the course.
In your response, as a minimum, you should:
1) Describe the predicted climate change impacts on your chosen case or sector
2) Discuss the rationale and the theoretical underpinnings of a carbon tax and compare it with the Direct Action Plan
3) Identify various risks and opportunities for the chosen sector or firm in a carbon constrained world.
4) Outline appropriate adaptation strategies
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LUCKNOW : Free hepatitis-C treatment for poor on cards
People suffering with chronic hepatitis C (CHC) infection may now look forward to financial aid from the state government. The state health department is proposing to include the disease in the list of non-curable diseases for which financial assistance is facilitated by the UP government.
LUCKNOW: People suffering with chronic hepatitis C (CHC) infection may now look forward to financial aid from the state government. The state health department is proposing to include the disease in the list of non-curable diseases for which financial assistance is facilitated by the UP government.
“The option is being explored considering the high burden of CHC infections in the state,” said Arvind Kumar, principal secretary, health and family welfare. The move may benefit people from poor socio-economic backgrounds as the treatment costs at least Rs 1.5 lakh, a huge amount for many patients. As per estimates, some 15 lakh persons in UP suffer with CHC infection and need treatment. However, around 1,500 patients get treated. Tamil Nadu government is already providing a similar facility to BPL patients.
Hepatitis C is a liver disease caused by the hepatitis C virus. It is transmitted through exposure to infected blood in case of blood transfusion, use of infected blood and blood products, use of contaminated injections during medical procedures, and through injection drug use. There is no vaccine to save oneself from hepatitis C virus. Every third patient of CHC eventually develops liver cirrhosis which may translate into end stage liver disease or liver cancer. Also, Hepatitis-C is more infectious than HIV but people do not fear it as much as HIV.
Experts at gastroentrology department at Sanjay Gandhi Post Graduate Institute of medical sciences, which is working to create awareness on Hepatitis C, revealed that very few patients have access to treatment. “Over 90% patients do not know that they are infected. And majority of those who know about it, discover it accidentally,” said Prof VA Saraswat, head of department adding that providing treatment alone may not be enough.
“There is need to prevent incidence of the disease. At least 50,000 new cases are added to the existing burden each year,” he informed. Prevention also becomes important considering that At its level, SGPGI would be initiating steps to examine prevalence ofn HCV in UP as a part of activities under Indian National Association for Study of Liver. It would also be coordinating with UP government for training of doctors to manage hepatitis-c at district levels.
Hepatitis c hotbeds in UP
Certain districts in western UP have emerged as a hepatitis-c hotbed, according to different studies undertaken by experts in gastroentrology. One such study revealed that hapur, meerut and muzaffarnagar districts showed a 15% positivity rate to hepatitis c against the national average of 1%. The fact came to fore in an assessment of 5,000 persons examined across 30-odd camps by Dr SK Tyagi, a private practicing gastroentrologist in Meerurt. A similar effort by doctors eastern and central UP suggests that districts of azamgarh, ambedkarnagar and barabanki could be hotbeds of hepatitis c.
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Data Science & Its Importance in Business
Data seems to be more and more important over time in determining the strategy and success rate of a product. It’s believed we can see how companies cope with competition from the results of data analysis. For that, there’s need to understand data science.
Data Science has become a revolutionary technology that everyone seems to talk about. Its hype doesn’t mean that people know actually what Data Science really is. Data Science is the study of data. The key word in data science is not “data”; it is “science”. Data science is only useful when the data are used to answer a question. That is the science part of the equation. It is about extracting, analyzing, visualizing, managing and storing data to create insights. These insights help the companies to make powerful data-driven decisions. Data science is the same concept as data mining and big data: “use the most powerful hardware, the most powerful programming systems, and the most efficient algorithms to solve problems”.
With Harvard Business Review labeled it as “The Sexiest Job of the 21st Century”, it is one of the most highly sought after jobs due to the abundance of data science position and a lucrative pay-scale. So, what’s actually that make Data Science interesting? Let’s explore the benefits of data science.
According to Simplilearn, there are several advantages of data science in business:
- Mitigating risk and fraud. Data scientists are trained to identify data that stands out in some way. They create statistical, network, path, and big data methodologies for predictive fraud propensity models and use those to create alerts that help ensure timely responses when unusual data is recognized.
- Delivering relevant products. One of the advantages of data science is that organizations can find when and where their products sell best. This can help deliver the right products at the right time—and can help companies develop new products to meet their customers’ needs.
- Personalized customer experiences. One of the most buzzworthy benefits of data science is the ability for sales and marketing teams to understand their audience on a very granular level. With this knowledge, an organization can create the best possible customer experiences.
One of the most common use case is the use of data science in financial institutions.
The lending industry often need accurate data in their business to target the right customers. That’s why lending companies are willing to invest heavily in data management.
Data science can help financial companies in many ways. It can help the company with risk measurement, credit approval, transactions, and billing issues. And that’s just its benefit from one industry. Data science can also add value to any business who can use their data well. From statistics and insights across workflows and hiring new candidates, to helping senior staff make better-informed decisions, data science is valuable to any company in any industry. That’s why it’s important for organizations to understand how data science works.
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Peer-to-Peer (P2P) Lending Definition:
Peer-to-peer lending, abbreviated also for P2P lending, is the exercise of providing funds to people or enterprises by using online services that match loan providers with borrowers. Peer-to-peer lending businesses often provide their services using the internet and attempt to work with the lower expenses and offer their particular business more cheaply than traditional economic institutions.
How peer-to-peer lending works?
Consequently, loan providers could earn higher comes back in comparison to financial savings and financial investment products offered by banks, even though borrowers can obtain money at lower interest rates, even after the P2P lending business has chosen a fee for providing the match-making platform and credit examining the borrower. There is the risk of the borrower defaulting on the financial loans taken out from peer-lending websites.
Also known as crowdlending, numerous p2p loans are insecure personal loans, though some of the most extensive quantities are lent to businesses.
Secured loans are sometimes offered by using luxurious assets such as precious jewelry, watches, vintage cars, fine art, buildings, airplane, as well as other company possessions as collateral. They are manufactured to an individual, company or charity.
Other forms of P2P lending include student financial loans, commercial and property loans, short term loans, as well as secured business loans, Asset leasing, and invoice discounting.
The interest rates can be set by lenders who compete for the cheapest rate on the contrary auction model or secured by the middleman business on the foundation of research of the debtor’s financing.
The lender’s investment in the loan is not normally secure by whatever government guarantee. On some services, loan companies minimize the risk of wrong loans by selecting which borrowers to provide inside, and minimize complete threat through diversifying specific investments amidst different borrowers..!
All lending intermediaries become for-profit businesses; they produce income through collecting a one time fee on financed financing from borrowers as well as by assessing a loan servicing price in order to investors or borrowers (both a fixed amount annually or even a percentage concerning the loan amount). Compared at supply markets, peer-to-peer lending is likely to have both less volatility plus reduced liquidity.
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alphaspirit - Fotolia
- Scott Robinson, Kentucky Farm Bureau
Big data and business analytics may not be considered ubiquitous quite yet, but they are getting there.
Total big data revenues over the past several years have grown exponentially and will approach $50 billion by 2017, according to business technology consultancy Wikibon. Forbes cited a 2015 Capgemini global study predicting a 56% increase in big data investments over three years. And Computer Science Corp. estimates data production overall by 2020 will be 44 times what it was in 2009.
The analytics needed to work with all of that data is growing just as fast. But analytics comes in many flavors, with the descriptive and predictive varieties being the biggest and most useful. Yet, of the two, descriptive is embraced far more by businesses than predictive.
Today, 90% of organizations use some form of descriptive analytics, which includes methods of mining historical data as well as real-time streams to extract useful facts to explain the data. The functions employed by descriptive data analysis include social analytics, production and distribution metrics, and correlations between operational results and changes in process.
Peering into the crystal ball
Predictive analytics involves processing big data to forecast future outcomes beyond the simple trending produced by business intelligence. It allows the enterprise to game out complex what-if scenarios, create accurate models for future performance, identify correlations that aren't intuitively obvious and perform more thorough root-cause analysis. With these capabilities, an organization can forecast customer/client behaviors, predict logistical failures, anticipate changes in purchasing patterns and make more accurate credit/procurement decisions.
Descriptive data analysis is considered fairly easy since it can be implemented with the standard aggregate functions built into most databases and knowledge of basic high school math. In contrast, predictive analytics calls for a strong command of statistics, college-level math (linear regression and so on) and often specialized software. Most organizations have the in-house resources to do descriptive analytics, while predictive analytics requires recruiting specialists and very often the purchase of new systems.
Yet the gap between descriptive and predictive ostensibly isn't as great as it seems. The resulting data from both methodologies is gathered for the sole purpose of answering questions, albeit different questions. For descriptive data, it's "What has happened?" and for predictive data, "What might happen next?"
An organization with a solid grasp of descriptive analytics is well on its way to embracing predictive. The reason is simple: Predictions are generally granular, focusing on the behavior or performance of one unit or individual among many—for example, "What will this person buy?" "Is this customer a credit risk?" Descriptive data analysis creates the rules and conditions that lead to accurate predictive analytics. You can't have the latter without the former. With well-constructed descriptive models, predictive models are much, much easier.
Descriptive models take large amounts of data and employ well-crafted rules of classification for that data to organize many units or individuals into useful subgroupings. Descriptive models condense that data into factors that identify certain characteristics of the people or processes being assessed that predictive models require.
Descriptive analytics is generally context-free -- no correlation to other data is usually involved -- while predictive analytics is all context. The accurate assessment of what a customer might want or need is greatly enhanced by knowing what the customer is doing. Customers with similar profiles and shopping patterns may vary wildly if the context of their shopping changes. Teenagers, for instance, buy different clothes in different quantities if they're about to leave home for college. When context is factored in via predictive analytics, the result is highly refined forecasting.
Decisions times two
Descriptive data analysis, therefore, is the first step on a journey that leads to predictive modeling power, an enterprise-transforming combination. The outcome of combining these two methodologies rests with the ability to create decision models.
A decision model incorporates all the information necessary to generate an actionable decision from the output of the descriptive model and the predictions, and past decisions, it generates. That increases the accuracy and efficiency of decision making by enabling optimization -- the ability to fine-tune processes and institutional behaviors based on the successful implementation of analytics.
This decision model leads to the next level -- prescriptive analytics -- a methodology for choosing effective courses of action from available options, and a very different beast from descriptive and predictive analytics. The point is that no branch of analytics exists in isolation; each methodology feeds into the next and adds a new layer of sophistication and functionality to the process.
The ultimate goal is to view analytics not simply as implementing a new process or tool, but more as important steps in an enterprise's evolution on the way to perpetual growth and change.
Data modeling techniques are changing
Data-driven companies turn to advanced analytics techniques
Predictive analytics improves business strategies
- Advanced analytics meld with machine learning to press more value from big data –ComputerWeekly.com
- Marketing analytics, big data and ethics –ComputerWeekly.com
- Partner with Qlik for Embedded Analytics in Healthcare –Qlik
- Computer Weekly – 6 March 2018: Getting up to speed with 5G –ComputerWeekly.com
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It wasn’t long ago that the idea of a zero-emissions electric vehicle silently cruising the streets sounded like something out of The Jetsons. According to the International Energy Agency, there are now more than seven million electric cars on the roads and there could be as many as 245 million by 2030.
But each of those cars relies on a battery to get from point A to point B. And those batteries are made with minerals like lithium, graphite, cobalt and nickel — all of which are mined.
Mined materials are also necessary to make wind turbines and solar panels. This demand is creating something of an environmental conundrum.
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Research shows that mining waste has increased more than 300 per cent in some regions in the past decade and mining is responsible for up to 20 per cent of greenhouse gas emissions. With the push for more renewables, those numbers are set to increase. According to the World Bank and independent studies, by 2050 the energy transition is expected to increase the demand for certain minerals 30- to 800-fold.
Yet experts warn that the inevitable increase in mining activity is unsustainable under existing laws and regulations that aren’t adequate to ensure the transition to renewable energy is safe and just.
“We’re trading fossil fuel extraction for mineral extraction,” Jamie Kneen from MiningWatch Canada told The Narwhal in an interview. “We have to change the rules. Action has to be much more comprehensive and committed.”
Last November, nearly 200 experts, academics, researchers and activists from around the world met in Ottawa to discuss what it would take for mining to have a positive role in the transition to a low-carbon future.
Here are their key recommendations, as compiled in a new report by MiningWatch Canada.
Reduce demand for energy and mined materials
The simplest way to reduce the demand for mined materials is to reduce the demand for energy.
A reduced demand for energy is necessary to reduce the impact of mining on communities. But it’s also necessary because the earth’s mineral resources are actually finite.
According to a 2019 report by Earthworks and the Institute for Sustainable Futures, the projected mineral demand for renewable energy would consume all of the cobalt, lithium and nickel on the planet.
That Earthworks report also found improving manufacturing efficiency and implementing recycling policies could reduce demand for certain primary minerals by up to 40 per cent.
According to the MiningWatch report, battery storage for electric vehicles is projected to be the main driver of the increased demand for mined metals in the energy transition. As a result, the report said systemic changes are needed in urban design and transportation systems to “massively reduce the number of cars, not just build zero-emissions vehicles instead.”
The MiningWatch report also found the greatest opportunity to reduce the need for battery metals is to simply recycle used batteries.
Companies like Tesla are already operating in-house recycling facilities. But Kneen said industry-led initiatives are not enough and governments should be encouraging and supporting recycling initiatives.
While B.C. has created legislation to ensure 100 per cent of new vehicles sold in the province are electric by 2040, it doesn’t include rules or guidelines around recycling.
Protect water from mining waste and disasters
The MiningWatch report stresses the importance of prioritizing environmental protection and preventing contamination and toxic mine waste disasters.
“If lithium is the new ‘white gold,’ water is our ‘blue gold.’ It must be protected above all else,” Rodrigue Turgeon, a spokesperson for the Citizen Committee Protecting the Esker, a grassroots organization in northern Quebec, said in the report.
Landscapes in northern B.C. are littered with warnings of what can happen if mine waste is inadequately managed.
In 2014, the Mount Polley mine spilled 24 million cubic metres of toxic waste into creeks, rivers and lakes when its tailings dam broke. And for more than 60 years, the abandoned Tulsequah Chief mine has been leaking contaminated waste water into a salmon watershed. These disasters illustrate the need for “no-go zones” — places where mining is prohibited.
The MiningWatch report suggests establishing participatory, community-based processes to identify no-go zones, supported by local, national and international legal frameworks.
Kneen said the challenge of protecting ecosystems where mining should not take place boils down to who has the final say.
“People are going to have to choose and it’s really a question of who gets to choose,” he said. “Is it the First Nation or the community? Or is it the government on behalf of society at large? Or is it just a corporate feasibility study?”
Respect Indigenous Rights and human rights
The right to say “no” to mining projects, however, is missing from most jurisdictions, including B.C.
The report notes that, to be sustainable, mineral extraction must “require the free, prior and informed consent of Indigenous Peoples and the consent of local communities prior to any mining exploration or developments.”
But in B.C., the out-of-date Mineral Tenure Act allows anyone with a computer and a few dollars to stake a claim without asking permission. And even when First Nations are consulted through the environmental assessment process, a vital part of Indigenous Rights is still missing.
“The problem we’re having is that consent doesn’t seem to include no,” Kneen said. “There’s a clear imbalance of power. When the mining company shows up, they’ve got their teams of technical people and lawyers and what have you. And then you’ve got the community people — they’re just outgunned.”
And when environmental disaster happens, Indigenous communities are often left with devastation to the natural ecosystems they rely on for food and culture.
“We’ve seen the disasters of Mount Polley’s massive mine waste spill and other failures worldwide grossly impacting Indigenous communities, the land and watersheds they protect,” Loretta Williams, one of the founding members of the First Nations Women Advocating Responsible Mining, said in the report.
The conference participants agreed that protecting basic human rights and respecting Indigenous sovereignty is vital as mining activity steadily increases. “Breaking from the pattern of colonial and capitalist exploitation has to be part of a just transition,” the report said.
Improve government policy, regulations and legislation
Legal reforms are also going to be necessary to ensure mining activity for renewable energy doesn’t cause more environmental harm than good.
In B.C., activists and responsible mining advocates have been calling for reforms to provincial laws for decades. One of the key reforms needed, critics say, is a law that ensures the polluter pays. Mining companies are required to pay deposits to the province before extracting any minerals to cover the costs of cleanup and closure in case the company goes bankrupt. But as The Narwhal recently reported, those deposits often aren’t enough to cover cleanup costs. B.C. is short more than $1 billion for cleanup and that deficit could ultimately be shouldered by taxpayers.
A recent poll by the BC Mining Law Reform network and Northern Confluence showed that 90 per cent of British Columbians surveyed want mining companies to be responsible for the environmental damages they cause.
Following the Mount Polley dam failure, an independent panel reviewed the incident and presented recommendations to the government to prevent similar disasters from happening. According to a recent report by the B.C. First Nations Energy and Mining Council, those recommendations still haven’t been adequately addressed by the province.
And the Tulsequah Chief has shown just how challenging cleaning up and closing a mine can be. The province, despite making a commitment to clean up the long-standing environmental damage, has been hamstrung by legal restrictions caused by the bankruptcy of the mine’s owner.
The MiningWatch report notes laws and government policies need to reflect the importance of minimizing social and environmental damage. “Legal protections need to be strengthened, developed and implemented to prevent harm, establish real accountability — including through supply chains — and respect Indigenous territories and governance.”
Kneen said the Initiative for Responsible Mining Assurance is a significant step in the right direction. Similar to the Forest Stewardship Council, the independent organization audits mines and rates them based on social, environmental and operational benchmarks. A mine automatically fails if it doesn’t meet certain requirements, such as not using child labour. The idea is if a mine has the certification, buyers can trust that the minerals were sourced responsibly.
Manufacturers and retailers can also become members, which commits them to sourcing from certified mines. In January, BMW committed to sourcing its raw materials to produce its fleet of electric vehicles from certified mines.
The program’s first audits have just wrapped up and while it remains to be seen how successful the program is, advocates are hopeful.
“They’re recognizing that there’s no mine in the world that’s ever going to get 100 per cent … but you work your way towards that,” Kneen said.
And since you’re here, we have a favour to ask. Our independent, ad-free journalism is made possible because the people who value our work also support it (did we mention our stories are free for all to read, not just those who can afford to pay?).
As a non-profit, reader-funded news organization, our goal isn’t to sell advertising or to please corporate bigwigs — it’s to bring evidence-based news and analysis to the surface for all Canadians. And at a time when most news organizations have been laying off reporters, we’ve hired eight journalists over the past year.
Not only are we filling a void in environment coverage, but we’re also telling stories differently — by centring Indigenous voices, by building community and by doing it all as a people-powered, non-profit outlet supported by more than 2,900 members.
The truth is we wouldn’t be here without you. Every single one of you who reads and shares our articles is a crucial part of building a new model for Canadian journalism that puts people before profit.
We know that these days the world’s problems can feel a *touch* overwhelming. It’s easy to feel like what we do doesn’t make any difference, but becoming a member of The Narwhal is one small way you truly can make a difference.
We’ve drafted a plan to make 2021 our biggest year yet, but we need your support to make it all happen.
If you believe news organizations should report to their readers, not advertisers or shareholders, please become a monthly member of The Narwhal today for any amount you can afford.
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If It’s Melted, It’s Ruined
If your freezer breaks down and all your pints melt, well, that’s a tragedy. And while it’s difficult to calculate the emotional toll of losing all that delicious ice cream, the impact on your wallet is easier to figure out.
We’ve been saying for a while now that if it’s melted, it’s ruined. That’s true of ice cream, of course, but honestly, we’re way more worried about what it means for our planet. Recently we’ve looked at climate change from the perspective of social justice, the Paris Climate Agreement, and our own flavors. But today we want to focus on something far more close to home: our wallets.
A Climate Change Price Tag?
Some things, like retreating glaciers, species going extinct, or coral reefs dying, are difficult, if not impossible, to put a true price tag on. (Sure, Australian tourism dollars might decline if the Great Barrier Reef is totally bleached, but how do you really calculate the impact of the loss of marine diversity caused by that bleaching?) But some things related to climate change, like storm cleanup, for instance, do come with a pretty clear price tag, and we thought we’d take a look at some of those examples to get a sense of the immense costs we face as our planet warms and our climate becomes more volatile.
Keeping the sea at bay
Miami Beach, population 90,000, is a city built on natural and manmade barrier reefs located just across Biscayne Bay from Miami. Miami Beach now regularly experiences flooding on sunny days. Water isn’t merely inundating neighborhoods from the bay or the ocean, a frightening enough prospect; it’s bubbling up from the ground — and that’s a serious problem. Which is why the city is currently spending about $400 million to pump water and raise streets and sidewalks.
Climate change as an “opportunity”
The Dutch have led a waterlogged life for about 1000 years, as long as people have settled this extremely low-lying part of Europe. But the Netherlands doesn’t try to fight water — it learns to live with it. The sea will come no matter what, so the Dutch let it in, via amazing feats of engineering and urban design. Plazas and parks, for example, that can be enjoyed by the public on dry days serve as reservoirs for excess water when flooding occurs. With about 50% of the country prone to flooding, the Dutch have spent billions of dollars rebuilding infrastructure to deal with the reality of climate change.
Cleaning up after the storm
If the Dutch approach seems excessive, then consider the consequences of inaction: Hurricane Sandy, the largest Atlantic storm system on record, caused about $65 billion in property damage and cleanup when it slammed into coastal New Jersey and New York City in 2012. New York City, given its huge population and susceptibility to flooding, was woefully unprepared for a storm of this kind. The city has since put aside something like $20 billion to deal with rising sea levels, but many critics feel that this is not enough.
If we’re merely reacting to climate change, then we’ll never keep up and the costs will keep rising along with the sea levels. What we need is resilience and long-term planning. Think about this: It’s going to cost about $100 million to move 400 people to higher ground from their village in Alaska, and the price to move a community of 60 in Louisiana is $48 million. While you’re mulling over those numbers, consider that as many as 13 million people are estimated to live in regions along the US coast that may be flooded by 2100. We’re not great at math, but that sure sounds like it’s going to cost a LOT of money.
The opposite of too much water
We hear a lot, understandably, about the oceans rising and bigger, badder tropical storms, but climate change can just as easily result in drought, which is what California suffered for years before recent rains refilled the reservoirs. In 2015, it’s estimated that the drought cost California farmers alone almost $3 billion. Dry weather also leads to an increase in wildfires, which cost the Forest Service about $2 billion a year to fight.
The time to act is now
In 2015, the EPA put out a report saying that if the world does not act to cut carbon emissions, the US could face economic losses of up to $180 billion by the end of the century, but given the unpredictable nature of things like natural disasters, it could be much worse. But taking action will not only reduce those losses, it will save lives and critical wildlife habitat and help the economy. As millions of activists and citizens around the world, and an increasing number of politicians and leaders, understand, there is no time to waste. Climate change is real, climate change is happening right now, and every moment counts. Join with us now and demand climate action.
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When the bitcoin was first introduced eight years ago, it promised to change payments. People would be able to transact directly with each other, without needing to place their trust in banks – but that promise still hasn’t materialised and adoption of bitcoins is low.
We were first told in 2009 that many transactions would be verifiable and validated by the bitcoin protocol. However, as we argued in a recent study, a significant adoption barrier to bitcoin is the lack of usability.
Since the inception of cryptocurrency, developers and researchers have been using metaphors to explain bitcoin in a clear effort to help people feel more comfortable with the technology.
A secure application for holding bitcoins is dubbed a “cryptowallet”, the trading platforms where people can buy and sell bitcoins are called “exchanges”, and in several locations around the world, ATMs have emerged for bitcoin-based transactions. The production of bitcoins is described as “mining”, but the only similarity between this and mining for gold or valuable gems, is that both processes are very, very difficult to achieve. Finally, bitcoins are called “coins”, even though they are entirely digital.
Using metaphors to refer to these technologies helps people feel more familiar with the technology. But there is also a downside: people expect that the technology can be used as regular money.
One could easily believe that, in fact, such “coins” are stored in a “wallet”, which leads to further misinterpretations: if these are coins, what do they look like? if it’s real money, how do I get refunds for paying for stuff? and do I get change if I don’t have the exact amount? But the coins don’t exist. They are merely entries in a highly secure, very restricted database.
There are no wallets, crypto or otherwise. These are either software applications that may or may not connect to the internet, or hardware-based solutions (similar to USB sticks). ATMs can be used to buy and sell coins, but teller machines do not hold “coins”. And, in the bitcoin world, there are many transactions that can’t mimic how regular money works.
If I pay for something with pound notes and then regret my purchase, I can return the item to the shop and the shop may or may not issue a refund. But the bitcoin protocol doesn’t allow this. If a transfer of bitcoins has been broadcast to the network, by design that transaction is final. It means that, had I paid for that item with bitcoins, the shop can’t issue a refund but instead has to process a new payment, or a charge back – which incurs additional processing fees. This isn’t a refund – as some money would be deducted from the full amount I originally paid.
X marks the spot
To support the adoption of bitcoin as an alternative payment, we need to have a system that is cheaper, better and more desirable compared with other forms of payments, such as debit cards.
The bitcoin is cheaper, because – even when paying by debit or credit cards – there is always a fee involved for processing such transactions. Some merchants will pay the fee themselves, or roll this cost over to the consumer, as an extra charge for paying by card. Paying in bitcoins has zero cost or very low cost, subject to how much of a hurry the consumer is in.
Everyday transactions in bitcoins are fairly straightforward and security is robust: if I need to pay somebody in bitcoins, I can send the exact amount to that other person’s bitcoin address (a randomly generated sequence of characters, that changes every time there is a transaction) by confirming it with my unique PIN-like number. The rest is done by the miners (more about which later) who need to verify that the transaction is unique and genuine.
Despite these clear advantages, bitcoin’s desirability factor remains low. And there is little we can do (at least for now) to increase its uptake. Notably, adoption is also affected by trust perceptions. People are more likely to trust the technology if they have a better understanding of how the bitcoin protocol works. This can be achieved without forcing everybody to become an expert in cryptography.
Four essential facts about bitcoin
What is bitcoin? It’s one of many cryptocurrencies – but the only one that has grabbed the headlines. It is a type of digital currency, created and regulated by a network of thousands of computers (known as peers) using encryption techniques. Because of this, its production is independent from any authority, such as banks and sovereign states – and trust in the bitcoin is produced by the technology itself. How does this happen?
Meet the blockchain: Simply put, the blockchain is a very restricted database, whose entries are the bitcoin transactions. The blockchain operates as a digital ledger of transactions. Just like regular businesses that keep a record of money coming in and going out, users of the cryptocurrency need to record all bitcoin-based transactions. The difference is that the blockchain is a decentralised and distributed, open-access ledger whose records are permanent and verifiable by the network of peers. So everybody can view past transactions, but nobody can alter them without having the consent of the majority. This means that the blockchain doesn’t exhibit weaknesses associated with traditional ledgers. The blockchain technology is secure by design.
How are bitcoins produced? Through mining, which is undertaken by the peers of the network. The miners are people and organisations that connect their computers in the network to offer processing power, using special software to solve very difficult algorithms, while leveraging the power of advanced computers and graphic cards. In return for their services (creating new bitcoins, authenticating transactions, maintaining the blockchain), they get rewarded with new bitcoins.
Where are bitcoins stored? A cryptowallet – which is a software application that stores private keys (code that looks like a very long PIN) – is where all bitcoins are stored. These private keys are connected to public keys (code again, but the equivalent would be a bank account). The best way to understand how a cryptowallet works is to think of it, in similar terms, as a secure connection between a person’s PIN to their bank account, which then allows them to check balances and make payments.
Money makes the world go round
The bitcoin hasn’t become the alternative payment system for consumers that was promised eight years ago. Widespread adoption of the cryptocurrency is hobbled by a number of factors: its reputation is associated far too often with alleged bad boys, and talk of a bubble that’s about to pop persists even as bitcoin continues to surge. But, above all else, few people can cut through the jargon to understand how it actually works.
These perceptions can shift if bitcoin-based transactions become easier to comprehend in a way that will help people build trust in the technology. Instead of replicating old paradigms, bitcoin should be embraced as a fresh new way to pay for stuff.
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The Basics of Building a Budget for Your Business
Free Book Preview Entrepreneur Kids: All About Money
For many small business owners, the process of budgeting is limited to figuring out where to get the cash to meet next week's payroll.
There are so many financial fires to put out in a given week that it's hard to find the time to do any short-or long-range financial planning. But failing to plan financially might mean that you are unknowingly planning to fail.
Business budgeting is one of the most powerful financial tools available to any small-business owner. Put simply, maintaining a good short- and long-range financial plan enables you to control your cash flow instead of having it control you.
The most effective financial budget includes both a short-range month-to-month plan for at least a calendar year and a long-range quarter-to-quarter plan you use for financial statement reporting. It should be prepared during the two months preceding the fiscal year-end to allow ample time for sufficient information-gathering.
The long-range plan should cover a period of at least three years (some go up to five years) on a quarterly basis, or even an annual basis. The long-term budget should be updated when the short-range plan is prepared.
While some owners prefer to leave the one-year budget unchanged for the year in which it provides projections, others adjust the budget during the year based on certain financial occurrences, such as an unplanned equipment purchase or a larger-than-expected upward sales trend.
Using the budget as an ongoing planning tool during a given year certainly is recommended. However, here is a word to the wise: budgeting is vital, but it is important to avoid getting so caught up in the budget process that you forget to keep doing business.
It is important to budget both the income statement and balance sheet. This enables you to consider potential cash-flow needs for our entire operation, not just as they pertain to income and expenses. For instance, if you had already been in business for a couple of years and were adding a new product line, you would need to consider the impact of inventory purchases on cash flow.
Budgeting only the income statement also doesn't allow a full analysis of the effect of potential capital expenditures on your financial picture. For instance, if you are planning to purchase real estate for your operation, you need to budget the effect the debt service will have on cash flow.
In the future, a budget can also help you determine the potential effects of expanding your facilities and the resulting higher rent payments of debt service.
In the startup phase, you will have to make reasonable assumptions about your business in establishing your budget. You will need to ask questions such as:
- How much can be sold in the first year?
- How much will sales grow in the following year?
- How will the products and/or services you are selling be priced?
- How much will it cost to produce your product? How much inventory will you need?
- What will your operating expenses be?
- How many employees will you need? How much will you pay them? How much will you pay yourself? What benefits will you offer? What will your payroll or unemployment taxes be?
- What will the income tax rate be? Will your business be an S corporation or a C corporation?
- What will your facilities needs be? How much will it cost you in rent or debt service for these facilities?
- What equipment will be needed to start the business? How much will it cost? Will there be additional equipment needs in subsequent years?
- What payment terms will you offer customers if you sell on credit? What payment terms will your suppliers give you?
- How much will you need to borrow? What will the collateral be? What will the interest rate be?
As for the actual preparation of the budget, you can create it manually or with the budgeting function that comes with most bookkeeping software packages.
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Financial Statement Analysis Chapter 15
Limitations of Financial Statement Analysis Differences in accounting methods between companies sometimes make comparisons difficult. We use the LIFO method to value inventory. We use the average cost method to value inventory.
Industry trends • Changes within the company • Consumer tastes • Technological changes • Economic factors Limitations of Financial Statement Analysis Analysts should look beyond the ratios.
Statements in Comparative and Common-Size Form • Dollar and percentage • changes on statements An item on a financial statement has little meaning by itself. The meaning of the numbers can be enhanced by drawing comparisons. • Common-size • statements • Ratios
Dollar and Percentage Changes on Statements Horizontal analysis (or trend analysis) shows the changes between years in the financial data in both dollar and percentage form.
Horizontal Analysis The following slides illustrate a horizontal analysis of Clover Corporation’s comparative balance sheets and comparative income statements for this year and last year.
Horizontal Analysis Calculating Change in Dollar Amounts Dollar Change Current Year Figure Base Year Figure = – The dollar amounts for last year become the “base” year figures.
Horizontal Analysis Calculating Change as a Percentage Percentage Change Dollar Change Base Year Figure × 100% =
Horizontal Analysis $12,000 – $23,500 = $(11,500) ($11,500 ÷ $23,500) × 100% = (48.9%)
Horizontal Analysis We could do this for the liabilities and stockholders’ equity, but now let’s look at the income statement accounts.
Horizontal Analysis Sales increased by 8.3%, yet net income decreased by 21.9%.
Horizontal Analysis There were increases in both cost of goods sold (14.3%) and operating expenses (2.1%). These increased costs more than offset the increase in sales, yielding an overall decrease in net income.
Trend Percentages Trend percentages state several years’ financial data in terms of a base year, which equals 100 percent.
Trend Percentage Current Year Amount Base Year Amount × 100% = Trend Analysis
Trend Analysis Look at the income information for Berry Products for the years 2007 through 2011. We will do a trend analysis on these amounts to see what we can learn about the company.
Trend Analysis Berry Products Income Information For the Years Ended December 31 The base year is 2007, and its amounts will equal 100%.
Trend Analysis Berry Products Income Information For the Years Ended December 31 2008 Amount ÷ 2007 Amount × 100% ( $290,000 ÷ $275,000 ) × 100% = 105% ( $198,000 ÷ $190,000 ) × 100% = 104% ( $ 92,000 ÷ $ 85,000 ) × 100% = 108%
Trend Analysis Berry Products Income Information For the Years Ended December 31 By analyzing the trends for Berry Products, we can see that cost of goods sold is increasing faster than sales, which is slowing the increase in gross margin.
Common-Size Statements Vertical analysis focuses on the relationships among financial statement items at a given point in time. A common-size financial statement is a vertical analysis in which each financial statement item is expressed as a percentage.
Common-Size Statements In income statements, all items usually are expressed as a percentage of sales.
Gross Margin Percentage Gross Margin Sales = Gross Margin Percentage This measure indicates how much of each sales dollar is left after deducting the cost of goods sold to cover expenses and provide a profit.
Common-Size Statements In balance sheets, all items usually are expressed as a percentage of total assets.
Common-Size Statements Common-size financial statements are particularly useful when comparing data from different companies.
Common-Size Statements Let’s take another look at the information from the comparative income statements of Clover Corporation for this year and last year. This time, let’s prepare common-size statements.
Common-Size Statements Sales is usually the base and is expressed as 100%.
Common-Size Statements This Year’s Cost ÷ This Year’s Sales × 100% ( $360,000 ÷ $520,000 ) × 100% = 69.2% Last Year’s Cost ÷ Last Year’s Sales × 100% ( $315,000 ÷ $480,000 ) × 100% = 65.6%
Common-Size Statements What conclusions can we draw?
Now, let’s look at Norton Corporation’s financial statements for this year and last year.
Ratio Analysis – The Common Stockholder The ratios that are of the most interest to stockholders include those ratios that focus on net income, dividends, and stockholders’ equities.
Net Income – Preferred Dividends Average Number of Common Shares Outstanding Earnings per Share = Earnings Per Share Whenever a ratio divides an income statement balance by a balance sheet balance, the average for the year is used in the denominator. Earnings form the basis for dividend payments and future increases in the value of shares of stock.
Net Income – Preferred Dividends Average Number of Common Shares Outstanding Earnings per Share = $53,690 – $0 ($17,000 + $27,400)/2 Earnings per Share = = $2.42 Earnings Per Share This measure indicates how much income was earned for each share of common stock outstanding.
Price-Earnings Ratio Market Price Per Share Earnings Per Share = Price-Earnings Ratio $20.00 $2.42 = = 8.26 times Price-Earnings Ratio A higher price-earnings ratio means that investors are willing to pay a premium for a company’s stock because of optimistic future growth prospects.
Dividend Payout Ratio Dividends Per Share Earnings Per Share = Dividend Payout Ratio $2.00 $2.42 = = 82.6% Dividend Payout Ratio This ratio gauges the portion of current earnings being paid out in dividends. Investors seeking dividends (market price growth) would like this ratio to be large (small).
Dividend Yield Ratio Dividends Per Share Market Price Per Share = Dividend Yield Ratio $2.00 $20.00 = = 10.00% Dividend Yield Ratio This ratio identifies the return, in terms of cash dividends, on the current market price of the stock.
Return on Total Assets Net Income + [Interest Expense × (1 – Tax Rate)] Average Total Assets = Return on Total Assets $53,690 + [$7,300 × (1 – .30)] ($300,000 + $346,390) ÷ 2 = = 18.19% Return on Total Assets Adding interest expense back to net income enables the return on assets to be compared for companies with different amounts of debt or over time for a single company that has changed its mix of debt and equity.
Return on Common Stockholders’ Equity Net Income – Preferred Dividends AverageStockholders’ Equity = Return on Common Stockholders’ Equity $53,690 – $0 ($180,000 + $234,390) ÷ 2 = = 25.91% Return on Common Stockholders’ Equity This measure indicates how well the company used the owners’ investments to earn income.
Fixed rate of return on borrowed funds Return on investment in assets Positive financial leverage > = Fixed rate of return on borrowed funds Return on investment in assets Negative financial leverage < = Financial Leverage Financial leverage results from the difference between the rate of return the company earns on investments in its own assets and the rate of return that the company must pay its creditors.
Book Value per Share Common Stockholders’ Equity Number of Common Shares Outstanding = Book Value per Share $234,390 27,400 = = $8.55 Book Value Per Share This ratio measures the amount that would be distributed to holders of each share of common stock if all assets were sold at their balance sheet carrying amounts after all creditors were paid off.
Book Value per Share Common Stockholders’ Equity Number of Common Shares Outstanding = Book Value per Share $234,390 27,400 = = $8.55 Book Value Per Share Notice that the book value per share of $8.55 does not equal the market value per share of $20. This is because the market price reflects expectations about future earnings and dividends, whereas the book value per share is based on historical cost.
Ratio Analysis – The Short–Term Creditor Short-term creditors, such as suppliers, want to be paid on time. Therefore, they focus on the company’s cash flows and working capital.
Working Capital The excess of current assets over current liabilities is known as working capital. Working capital is not free. It must be financed with long-term debt and equity.
Current Ratio Current Assets Current Liabilities = Current Ratio The current ratio measures a company’s short-term debt paying ability. A declining ratio may be a sign of deteriorating financial condition, or it might result from eliminating obsolete inventories.
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Gasoline and Oil Prices
Gasoline and Oil Prices
Updated October 31, 2008
Specialist in Energy Economics
Resources, Science, and Industry Division
Gasoline and Oil Prices
American gasoline consumers faced rapidly escalating prices during the first
half of 2008, followed by declining prices in the second half. As prices increased to
over $4.00 per gallon, consumers faced difficult choices concerning how to allocate
limited budgets as the economy slowed. The price increases also adversely affected
major industries, including automobile production, transportation, and agriculture.
The high gasoline prices also were thought to contribute to the slow-down in
economic growth and the potential for general price inflation. The oil industry
earned record corporate profits while other sectors of the economy were negatively
Gasoline prices did not increase on their own over this period. The rising price
of gasoline was driven by the increasing price of crude oil, the major cost component
of gasoline. Crude oil prices, which peaked at just under $150 per barrel in July, and
then turned down, rose more quickly than gasoline prices, and the cost share of crude
oil per gallon of gasoline rose, putting cost pressure on the refining, distribution, and
marketing sectors of the gasoline supply chain.
While the recent increases in the price of crude oil began in late 2007, the price
of oil has been increasing, at different rates, since 2004. Many factors have
contributed to the price increases over this period. Over the past five years, the mix
of factors affecting price at any particular time has varied.
Recently, several factors, including the continuing increase in world oil demand,
the effect of speculation on energy futures markets, the transformation of the energy
futures market into a pure financial market rather than a commodity market, the
declining value of the dollar, foreign governments’ fuel subsidization, and limits to
the ability of the market to increase supply, have been identified as key in explaining
oil, and therefore gasoline price volatility. The key factor of world oil demand is
rapidly weakening as world growth in gross domestic product slows in the fourth
quarter of 2008 and forecasted growth estimates for 2009 are reduced.
Policy debates have focused on curbing speculation on oil futures markets by
increasing regulatory presence. Over three dozen pieces of legislation have beenth
introduced in the 110 Congress to address speculation-related issues. Other possible
policy directions have included declaring a moratorium on collection of the federal
excise tax on gasoline, conservation, and the use of oil in the Strategic Petroleum
Reserve to augment U.S. supplies of crude oil. Additionally, the possibility of
drilling in currently excluded areas on the Atlantic and Pacific outer continental shelf,
as well as the Gulf of Mexico, have been considered. The potential opening of the
Alaska National Wildlife Refuge for oil exploration and development has also been
The oil market has demonstrated a tendency to be cyclic and sharply volatile.
Policy measures that assume long-term stability in the market are unlikely to attain
the multiplicity of goals for oil policy the American public desires.
Gasoline and Oil Price Volatility..................................1
Factors Affecting Oil Prices......................................4
Value of the Dollar............................................10
List of Tables
Table 1. U.S. Monthly Gasoline Prices.................................2
Table 2. Cost Composition of Gasoline, June 2007-2008...................3
Table 3. Monthly West Texas Intermediate Oil Spot Price..................4
Table 4. World Oil Demand, 1997-2007................................5
Table 5. Futures and Spot Prices for WTI Crude Oil, 2007-2008.............8
Table 6. Commodity Purchases by Index Speculators......................9
Table 7. OPEC Excess Crude Oil Capacity.............................12
Gasoline and Oil Prices
During the summer of 2008, American consumers faced gasoline prices that
attained record high levels of over $4.00 per gallon, and oil prices of more than $1401
per barrel. These high prices contributed to a downturn in economic growth and an
increase in inflation. They forced consumers to make difficult choices concerning
spending patterns, while their general economic well-being declined. The record
prices raised costs and adversely affected a wide variety of industries, including
transportation, automobiles, and agriculture.
As of the week of October 20, 2008, gasoline prices were at $2.91 per gallon
and the price of oil was below $70 per barrel.2 However, this favorable news for U.S.
consumers came in an environment of financial and credit market problems, and
growing fears that the nation was facing an economic recession.
Because there does not seem to be one, easily identifiable, factor that has caused
the quick surge in oil prices, consensus on how to mitigate the situation through
policy has been elusive. Calls for increased exploration and drilling in Alaska and
currently restricted offshore areas, energy conservation, increased reliance on
alternative energy sources, curbing speculation on oil futures markets, releasing oil
from the Strategic Petroleum Reserve, suspending the federal tax on gasoline, and
taxing the profits of oil companies have all been debated.
While it may be easier to identify the first-order causes of the rapid decline in
oil prices, declining oil product demand linked to a world-wide slowdown in
economic growth, other factors that contributed to the price increases earlier in 2008
could also be identified.
This report examines the extent of price volatility in gasoline and oil markets,
focuses on the linkage between the two, and analyzes the causes of the price
increases and the likelihood that they have been reversed through market responses
or policy measures.
Gasoline and Oil Price Volatility
The Energy Information Administration (EIA) reported that retail gasoline
prices increased by 33% from January through July 2008, or, by over $1 per gallon.3
Although the price was higher in each month in 2008, on a month-by-month basis,
1 Diesel and aviation fuel prices increased at least as much as gasoline prices.
2 Energy Information Administration, West Texas Intermediate Spot Price, and weekly
Gasoline Price data available at [http://www.eia.doe.gov].
3 Table 1 represents U.S. regular gasoline, all formulations.
compared to 2007, the greatest differential was observed in July, when prices were
about $1.10 per gallon higher than in the previous year.
These price increases led consumers to respond by using less gasoline and
driving fewer miles. By mid-July 2008, gasoline demand had declined by about
340,000 barrels per day (b/d), or 3.6%, compared to a similar period in 2007.4 By
October 2008, gasoline demand compared to the same period in 2007 was down by
about 392,000 b/d, or 4.2%.5 Miles traveled declined by 3.7% in May 2008 compared
to May 2007, and 3.6% in July 2008 compared to July 2007.6 These responses are
important because they represent a potential market adjustment that could result in
the moderating of the price increases of the first half of 2008. If consumption did not
decline in the face of sharp price increases, there would be little incentive for
producers not to continue raising prices.
Table 1. U.S. Monthly Gasoline Prices
(cents per gallon)
J a nuary 224.0 304.3
February 227.8 302.8
August 278.6 377.9
September 280.3 370.3
Source: Energy Information Administration, available
As gasoline prices fall during the fourth quarter of 2008, they could provide
consumers an incentive to increase consumption. However, slower economic growth,
job losses, and reduced incomes are likely to depress gasoline consumption. As a
result the price effect, which acts to stimulate gasoline consumption, is likely to be
offset by an income effect, which acts to reduce gasoline consumption.
4 Energy Information Administration, This Week in Petroleum, Gasoline, July 23, 2008.
5 Ibid. October 22, 2008.
6 Federal Highway Administration, Traffic Volume Trends, May and July 2008.
During the price increases of the first half of 2008, the cost composition of
gasoline changed. Table 2 shows that not only did crude oil cost more per gallon of
gasoline, but its share of the total price increased. Crude oil cost about $1.54 per
gallon of gasoline in June 2007, rose to $3.00 per gallon of gasoline in June 2008,
and fell to $2.16 per gallon by October 2008.
Table 2. Cost Composition of Gasoline, June 2007-2008
Refining 22.7 10.0
Distribution/Marketing 13.7 6.0
Source: Energy Information Administration, Gasoline and Diesel
Fuel Update, October 22, 2008.
Refining, as a share of the cost of a gallon of gasoline declined by over 50%,
and fell from $0.69 per gallon in 2007, to $0.36 per gallon in 2008. This nearly 48%
fall in cash flow to refiners has reversed the economic performance of refiners in
recent years, and puts into even greater question the possibility of expanding the U.S.
refining capacity base. Distribution and marketing’s share of the price of a gallon of
gasoline also declined from June 2007 to October 2008, putting pressure on gas
station owners as they saw their net return per gallon sold fall. Taxes were less
affected by the growing role of crude oil in the cost structure of gasoline because,
while the federal excise tax on gasoline is a fixed $0.184 per gallon, and as a result
will decline in percentage terms as the price of gasoline rises, some state and local
taxes on gasoline are percent of value, or ad valorem, taxes and will retain a constant
share of cost as the price of gasoline rises.
The data presented in Table 2 suggest that the major reason the price of gasoline
has been volatile in 2008 is because the price of crude oil has been volatile. The rise
and fall in the price of crude oil has not only affected consumers, it has affected
virtually all the parts of the gasoline supply chain.
Table 3. Monthly West Texas Intermediate Oil Spot Price
(dollars per barrel)
J a nuary $54.51 92.97
February 59.28 95.39
March 60.44 105.45
April 63.98 112.58
September 79.91 104.11
Source: Energy Information Administration, available
Table 1 and Table 3 show that while the price of crude oil rose by about 24%
in the second half of 2007, the price of gasoline rose by only about 2% over the same
time period. While crude oil prices increased by another 44% in the first half of
2008, gasoline prices increased by 34% over the same period. Anticipated and actual
cuts in demand for gasoline may have caused firms to resist passing the full cost
increases of crude oil on to consumers in 2007, increasing the rate at which gasoline
prices rose in early 2008.
Crude oil prices fell by 22% from July through September 2008, while gasoline
prices fell by only about 9%. Partial data for October 2008 suggest that the average
price of crude oil fell to about $86 per barrel, or 17% compared to September 2008,
while the price of gasoline fell by about 14% during the same period. The lags in
passing declining costs on to consumers may be due to inventory policies that require
the covering of past costs, or to attempts by the refining industry to enhance returns
after a period of reduced earnings in 2008.
Factors Affecting Oil Prices
The price of oil is set on a world market, over which no firm has direct control.
However, the market differs in significant ways from the economic conception of a
free, competitive, market. Five countries-the United States, China, Japan, India, and
South Korea-consumed over 45% of the world demand of 85.2 million barrels per
day in 2007, while producing only 14% of world production. As a result, these
countries, as well as many other net consuming nations, depend on world trade in
crude oil. Since production of crude oil depends on a geological formation to yield
the oil, only certain places in the world can produce oil at high levels, in excess of
their own consumption. These areas are concentrated in the Persian Gulf, where over
60% of known proved reserves are located. Reserves can be augmented, and
production can be increased, only after the expenditure of billions of dollars and
years of development after a discovery. The Persian Gulf oil producers and others
attempt to exercise control of the price of oil through the Organization of the
Petroleum Exporting Countries (OPEC).
Because of the characteristics of consumers and producers in the market, both
the demand and the supply sides of the market are very inelastic, or price insensitive,
in the short and intermediate term. Since neither consumers nor producers can easily
make quantity adjustments in response to changing prices, the market price may not
be singular. There may be a range of prices that are consistent with the market
avoiding physical shortages or surpluses. In this type of market environment, high
levels of price volatility are likely.
A frequently cited reason for high crude oil prices is the growth of world
demand, driven by China and India.
Table 4. World Oil Demand, 1997-2007
(thousand barrels per day)
YearDemand% of GrowthYearDemand% of Growth
1997 73,598 5.8 2003 79,296 1.9
1998 73,939 0.05 2004 82,111 3.5
1999 75,573 2.2 2005 83,317 1.5
2000 76,340 1.0 2006 84,230 1.1
2001 76,904 0.07 2007 85,220 1.2
Source: BP Statistical Review of World Energy 2008.
Note: Growth is the percentage change in a year over the previous year.
Table 4 shows that the total growth in demand over the past five years of 7.5%
is higher than the total growth of 5.3% over the previous five years. Over the past
five years, from 2003 to 2007, consumption growth in China totaled 35%, higher
than the world growth rate. However, the growth of Chinese demand cannot be
considered in isolation. Since the crude oil market is world-wide, the high level of
Chinese growth should be considered only in the context of total world demand
Although 1997 and 2004 stand out as years in which annual growth exceeded
the ten year average of 1.3%, the data in Table 4 might not appear to suggest that
7 For example, total consumption demand in Japan and Europe declined between 2006 and
demand growth could be sufficient to push crude oil prices to the record levels
observed in July 2008. In the case of the oil market, it may be that percentage
changes taken alone are misleading.
Because of the nature of oil production, which is characterized by time lags, an
inability to easily expand output from existing fields, and low incentives to keep
production as excess capacity, the actual volume of demand increases, irrespective
of the percentage value, is a key factor. This differentiates the oil industry from other
manufacturing and service industries where marginal percentage increments in output
can be met by using the existing capital stock and labor force more intensively.
The demand increase of 3.5%, or over 2.8 million b/d, in 2004, reduced spare
capacity in the world, and created a tight balance between demand and supply. When
growth fell to 1.5% in 2005, that, nonetheless, represented a further expansion of
required world production by 1.2 million b/d. Because world production could not
expand quickly enough to meet this new demand, further reductions in excess
capacity occurred and the tight market conditions continued. When an increase in
demand causes total demand to exceed current production, it must be met by
reducing excess capacity. When excess capacity in the industry falls, markets
anticipate that the reduced excess capacity is less able to accommodate future
possible supply disruptions and, as a result, the price increases.
The solution to rising prices, if one concludes that world demand growth cannot
be controlled in the long run, is expansion of output. However, the largest oil
reserves are believed to be already discovered and in production. Future fields might
well be smaller and more costly. Data shows that in 2007, the world level of proven
reserves declined from 1.239 trillion barrels to 1.237 trillion barrels, suggesting that
new discoveries did not offset 2007 production levels.8
Estimates of world oil demand for 2009 are being revised downward. The
International Energy Agency (IEA) cut its forecast world demand for crude oil by
500,000 b/d for the second half of 2008. In addition, it cut 400,000 b/d from its
forecast for 2009. These revisions yield a 2009 world oil demand of 87.2 million b/d,
some 700,000 b/d over 2008 levels.9 Although the IEA sees demand declining in the
industrialized nations, it sees demand continuing to increase in emerging markets.
The reason for the reduction in forecast world oil demand is a declining outlook
for world economic growth. The International Monetary Fund (IMF) forecast for
world gross domestic product growth for 2008 was 3.9%, and for 2009 is 3.0%, after
5.0% growth in 2007. The financial crisis being experienced on world markets and
the continuing effects of high commodity prices are blamed for reduced growth.10
8 BP Statistical Review of World Energy 2008, June 2008, p. 6.
9 International Energy Agency, Oil Market Report, October 10, 2008.
10 International Monetary Fund, World Economic Outlook, October 2008.
One of the most debated factors in rising oil prices has been the role of
speculators, particularly those investing through commodity index funds.
Speculators have always been part of energy futures markets, but it generally has
been as the other side of hedging transactions by physical traders.11 Their role has
been to accept price risk when physical traders sought to transfer it, and lock-in
prices. Recently, however, commodities’ futures markets have become part of
financial investor portfolio strategies. As a result, the market has seen an inflow of
new participants that have no interest in the physical commodity, beyond the
possibility of profiting from its price variations.
The oil futures market is actually composed of three different markets; regulated
futures exchanges like the New York Mercantile Exchange (NYMEX), electronic
trading facilities like the Intercontinental Exchange (ICE), and the Over the Counter
(OTC), or swap market. Each market offers a different contract, traded under
different rules, and with different degrees of regulatory control.12 The focus for oil
price effects has recently been on the NYMEX where a standardized futures contract,
based on West Texas Intermediate (WTI) crude oil, deliverable at Cushing,
Oklahoma, is traded under the regulation of the Commodities Futures Trading
Commission (CFTC). This market is financial in nature, in the sense that little or no
oil actually is traded, or changes hands. Almost all contract gains and losses are
settled in cash, and positions, either long (as a holder of the right to buy oil) or short
(as a holder of the right to sell oil) can be closed out, or offset by purchasing a
contract that offsets the original position.
In principle, there is little reason why any transaction on the oil futures markets
should affect the current price of oil. What is being traded in these markets is a
contract that obligates an investor to buy oil one month, or more, in the future at a
known, set, price. If more investors desire to be in that position, the demand for the
contract goes up, taking with it the contract price at which that oil might be traded.
Again, in principle, this transaction does not affect any demand or supply
fundamental in the physical oil market, and should not necessarily affect the current
price of oil. In general, it is more likely that shifts in the underlying fundamentals of
oil demand and supply could affect the expectations of future prices held by
investors, and alter their behavior causing them to buy or sell, leading to price
variations that reflect the evolving market forces in the physical market.
In the real market for oil, it is possible that purely financially based
expectations, realized through changing positions in the financial markets, might
affect the real price of oil. The spot market, a market for the delivery of real crude
oil, bases its price on the futures market, and EIA data show that the two prices vary
only by a few cents as observed in Table 5.
11 See CRS Report RL31923, Derivatives, Risk Management, and Policy in the Energy
Markets, by Robert Pirog, for more on the mechanics of the hedging process.
12 See CRS Report RL34555, Speculation and Energy Prices: Legislative Responses, by
Mark Jickling and Lynn J. Cunningham, for more on the focus and degree of oversight and
The reason for this close correlation is that the spot price is in itself a forward
price. Oil contracted today on the spot market must generally be delivered within
twenty-one days, with notice given to the buyer prior to delivery. The near month
futures contract generally covers thirty days or less into the future, hence there is
substantial overlap between futures market contract delivery and spot market
delivery. As a result, the NYMEX near month futures price is the basis for the spot
market price, adjusted for relatively minor differences in delivery time and other
factors. This linkage between the spot and futures market price is the connection
between the financial oil market and the real oil market. It allows investment
decisions by financial institutions and investment funds to be transferred quickly and
directly to gasoline consumers.
Table 5. Futures and Spot Prices for WTI Crude Oil, 2007-2008
(dollars per barrel)
Spot priceFuture priceSpot priceFuture price
2007 2007 2008 2008
J a nuary $54.51 $54.35 $92.97 $92.93
February 59.28 59.39 95.39 95.35
March 60.44 60.74 105.45 105.45
April 63.98 64.04 112.58 112.46
May 63.45 63.53 125.40 125.46
J une 67.49 67.53 133.88 134.02
J uly 74.12 74.15 133.48 133.37
September 79.91 79.63 103.76 104.11
October 85.80 85.55
Nove mb er 94.77 94.63
December 91.69 91.74
Source: Energy Information Administration, available at [http://www.eia.doe.gov].
It is possible to take almost the reverse position on the spot versus future price
correlation. In this view, the futures price must always adjust to the spot price. At
the expiration date of the futures contract, the spot price must equal the futures price
on the expiring contract because the holder of futures contracts can always choose
to receive oil rather than a cash settlement if desired. Futures prices are seen as
driven by expectations of the future spot price. In this market conception, the
primary control mechanism is that essentially all of the futures market participants
are real commodity hedgers.13
13 David L. Crawford, “Oil Futures” Are a Phony Target, Philadelphia Daily News, August
Several factors are important in balancing these arguments. The approach that
claims futures markets control the spot price are based on investor behavior that is
at odds with that of the perfectly rational financial investor of economic theory. For
this approach to have validity, two tests should be met. First, there should be a class
of participants in the market that are not hedgers in the sense of having a need to lock
in the price of oil for commercial use, for example, purely financial investors.
Second, there should be some explanation, and evidence, that the non-commercial
class of market participants were likely making investment decisions driven by some
other rationale beyond that of rational economic, financial analysis.
No definite, quantitative evidence is available for either condition; however,
testimony given at congressional hearings indicates that new participants may be
entering the oil futures markets in the form of investment by commodity index
Table 6. Commodity Purchases by Index Speculators
(millions of barrels)
Holdings 1/1/03Holdings 3/12/08Net Purchases
WTI Crude Oil99.88638.38538.99
Brent Crude Oil47.07191.59144.52
Gasoline 2,624.24 8,549.15 5,924.90
Source: Michael W. Masters, Testimony before the Committee on Homeland Security and
Governmental Affairs, United States Senate, May 20, 2008.
The data in Table 6 show that over a five year period, holdings of crude oil and
gasoline in the form of futures contracts, by investors in commodity index funds
increased by over 500% in the case of WTI crude oil, and over 200% in the case of
gasoline. Investors in these funds include pension funds, university endowments,
private investors, hedge funds and sovereign wealth funds. Commodity index funds
pool investors’ funds and purchase futures contracts in a wide variety of commodities
markets, including agriculture, livestock, energy, base, and precious metals. In each
of these markets, the funds have expanded their holdings since 2003 in amounts
comparable to those observed in Table 6.15
The purpose of commodity index fund investment is not to gain title to
commodities; the funds settle their contract positions in cash. The goal is the benefit
of diversification as well as the potential for high rates of return. Commodity prices
are thought to vary inversely with financial investments in traditional corporate
shares and bonds. For example, if the Dow Jones Industrial Average of corporate
shares declines on a particular day, investors might expect to observe an increase in
the index value of commodity futures. This inverse performance of financial and
commodity markets reduces the over-all risk in investors’ portfolios, and presents
investors a more favorable risk/return profile.
14 Michael W. Masters, Testimony before the Committee on Homeland Security and
Governmental Affairs, United States Senate, May 20, 2008.
15 Ibid., p. 3.
Since futures contracts in energy markets have a finite time horizon, when the
contracts expire, new contracts must be purchased to keep the target balance between
stocks, bonds, and commodities in place. As a result, once commodity index fund
managers determine that commodity investments are a desirable part of their
portfolios, this new source of demand is, in effect, permanent. Any new source of
demand, driven not by the fundamentals, or expectations, of oil demand and supply,
but by portfolio decisions is likely to raise the price of an oil contract on the futures
market, which is transmitted directly to consumers through the linkage between the
futures and spot market prices.
For commodity index investments to be an important factor in the increasing
price of oil over time, not only must there be an initial expansion of demand, but
growing demand in each subsequent time period. This type of demand growth might
result from favorable expectations concerning the fundamentals of the oil market, or
it could result from a herd mentality among portfolio managers, which could
contribute to a financial bubble due to speculators entering the commodity futures
market and driving up prices of contracts. If the commodity futures market has a bias
toward this type of upward price movement, and it is supported by strong
fundamentals in the real commodity markets, growing demand and/or tight supplies,
it is likely that the result will be increasing prices, as observed in the price of oil since
If the effects of financial speculation either increased the price of oil or caused
the price to rise faster than justified by market fundamentals during the first half of
2008, they are likely to have similar, but reverse, effects during the current market
downturn. The financial crisis has provided incentives for financial firms and hedge
funds to move to a more liquid investment position, increasing their cash balances.
This allows the firms to strengthen their balance sheets by reducing their holdings of
risky assets, and provides readily accessible reserves should investors demand to
withdraw their funds.
Although data is not available, it is likely that some speculative, financial
positions on commodity markets have been liquidated as firms strive to increase their
cash holdings. This attempt to sell oil could possibly cause the price of oil on the
NYMEX to fall, or fall more quickly than justified by the weakening fundamentals
in the world oil market.
Value of the Dollar
Many analysts believe the price of oil varies inversely with the value of the
dollar against other major currencies, notably the euro. Oil is priced in dollars on the
international market. If the dollar falls in value against another currency, it takes
fewer units of that currency to purchase the requisite number of dollars needed to buy
a barrel of oil. As a result, oil becomes cheaper in the other currency, say the euro,
than in dollars. The price of oil measured in dollars then rises. Each dollar purchases
a smaller fraction of a barrel of oil as a result. Holding oil, rather than dollars,
becomes a way to protect against a declining dollar.
Over the period of rising oil prices, 2004 to mid-2008, the euro/dollar exchange
rate has been variable. From January 2, 2004 to January 3, 2005, the euro increased
in value relative to the dollar, by 7%. From January 3, 2005 to January 3, 2006, the
euro declined in value relative to the dollar by 11%. From January 3, 2006, to
January 2, 2007 the euro increased in value relative to the dollar by 10.8%. From
January 2, 2007 to January 2, 2008 the euro increased in value relative to the dollar
The increasing value of the euro in 2007 may have been a factor in the
increasing price of oil over the same period. As of the end of October 2008, the
dollar had begun to strengthen, or increase in value, with respect to the euro and the
British pound sterling. This increase in the value of the dollar would tend to weaken
the price of oil if the same relationship observed in 2007 continues to hold.
In many areas of the world, gasoline consumers have been protected from the
effects of higher world oil prices by their governments through fuel subsidies. For
example, it was reported that in July 2008 the price for a gallon of gasoline in
Venezuela was $0.12, $0.40 in Iran, $0.45 in Saudi Arabia, and $0.89 in Egypt.17
High population countries like China, Indonesia, and Russia also subsidize gasoline.
The effect of fuel subsidies is to reduce the ability of the natural market forces
of demand to lower price. Consumers make decisions based on artificially set prices.
Consumption is higher than it would be if they faced the market price. Producers see
less reason to lower prices because demand continues to be strong. The demand
effect also affects consumers in nations that do not subsidize. Although consumers
in the non-subsidy countries may cut back on consumption when faced with higher
prices, their decisions may be negated by demand growth in subsidized markets. In
this way, governments that subsidize fuel costs in their domestic markets are
adopting a strategy which supports oil producers and high prices.
Nations that subsidize fuel costs do pay a price, whether they are oil exporters
or not. The subsidy is generally a large drain on the national treasury, causes
inefficient allocation of resources, and anomalies in trade. For example, Iran exports
over 2 million barrels per day of crude oil, but imports gasoline because of domestic
demand for gasoline that exceeds Iran’s refining capacity.
Oil supply is relatively insensitive to price changes in the short run. More oil
production can enter the market in times of high prices only if excess capacity exists18
at producing fields, given the level of demand. Similarly, production only
minimally declines when prices fall, because it is uneconomic to cut production rates
at producing fields, due to the wide spread between the cost of extraction and typical
levels of price observed over the past five years, as well as high fixed costs. Excess
capacity is thought to exist only in the Organization of the Petroleum Exporting
16 An increase in the value of the euro is the same as a decrease in the value of the dollar.
17 CNN Special Report, U.S. Gas: So Cheap it Hurts, July 15, 2008.
18 Excess capacity is sometimes referred to as “spare capacity.”
Excess capacity hit a recent peak of about 7 million barrels per day in 2002, and
has been lower than peak, but increasing, since 2004. Table 7 shows the pivotal role
played by Saudi Arabia in the world oil market. Saudi excess capacity accounted for
82% of OPEC spare capacity in 2005, and 61% in 2007. Nigerian oil production is
subject to disruption due to political upheaval, and Iran and the oil importing nations
are at odds over Iran’s nuclear ambitions. The most direct way to augment spare
capacity in the short-run is through demand reduction, generally as a result of higher
prices and slowing economic growth. Because excess capacity has increased over the
2007-2008 period, it is unlikely that excess capacity constraints were the major factor
in the recent price increases.
In the longer term, if world demand for oil continues to grow as more nations
develop and gain income and wealth, excess capacity is likely to be tight, unless high
levels of investment in productive capacity take place. Investment in productive
capacity is limited by “resource nationalism.” Resource nationalism refers to the
practices of countries with known, or suspected, oil reserves that limit access to those
potential supplies. If national oil companies, either due to lack of funding, or
expertise, or political direction, fail to develop oil resources the world oil market is
likely to have difficulty keeping up with world demand, perpetuating high prices.
Table 7. OPEC Excess Crude Oil Capacity
(thousands of barrels per day)
Ango l a NA NA 0 4 7 343
K uwait 0 128 222 300 294
Alge ria 21 10 3 3 103
UAE 21 267 252 339 42
Ir an 15 143 316 148 40
Nige ria 231 653 720 665 207
Source: Petroleum Intelligence Weekly, September 3, 2007.
a. Values for 2008 and 2010 are estimates.
Oil importing countries can create excess capacity in the world market by
reducing their own demand, or augmenting their own oil production, if they hold oil
reserves. While it is unlikely that any importing countries hold undeveloped reserves
comparable to those in the larger OPEC nations, even more modest increases in
production may reduce prices due to the price insensitive nature of oil demand. In
this type of market, with a low degree of price sensitivity, relatively small changes
in production might affect both current and future prices.
The increases in gasoline and oil prices have led to a number of congressional
initiatives. Based on the number of bills introduced, a primary focus of the 110th
Congress has been on curbing oil speculation activities. Proposed legislation has
focused on: closing a variety of regulatory loopholes that have prevented regulatory
authorities from exercising oversight, increasing regulatory resources, assigning
emergency regulatory powers, and attempting to reduce the desirability of energy
futures trading by increasing margin requirements, as well as data reporting.19 Over
three dozen pieces of proposed legislation were considered in the 110th Congress. It
is possible, that because activities on the oil futures markets may have escaped
regulatory scrutiny, strategies were undertaken that resulted in price manipulation.
Other policy approaches suggested to reduce gasoline prices included the
suspension of the federal excise tax on gasoline. This tax is $0.184 cents per gallon,
and the revenue generated is applied to the Highway Trust Fund. Concern was
expressed as to whether the tax suspension would be passed on to consumers by
refiners who collected the tax, and whether highway construction projects and the
local employment they support would be adversely affected.20
In September of 2008, the Highway Trust Fund was approaching a zero balance,
a condition that would threaten the continuation and completion of construction
projects all over the country. The shortfall in funds came about as a result of reduced
revenues linked to declining gasoline purchases resulting from higher prices. A
transfer of $8 billion from the U.S. Treasury to the Highway Trust Fund (P.L. 110-
The United States maintains a Strategic Petroleum Reserve of almost 750
million barrels of oil. Some have suggested that releasing oil from the reserve might
reduce prices at the pump. Others felt that the amounts of oil that could be feasibly
released were insufficient to affect gasoline prices, or that the OPEC nations might
cut their output in response, cancelling any price effect.
Debate also has taken place concerning expansion of domestic supply, by
drilling the restricted areas of the outer continental shelf, and other areas. This
centered on areas currently excluded from oil development on the Atlantic and
19 For more on these topics, see CRS Report RL34555, Speculation and Energy Prices:
Legislative Responses, by Mark Jickling and Lynn J. Cunningham.
20 For more on this topic, see CRS Report RL34475, Transportation Fuel Taxes: Impacts
of a Repeal or Moratorium, by Robert Pirog and John W. Fischer.
Pacific coasts, as well as some excluded areas in the Gulf of Mexico.21 Also
discussed was opening restricted areas in the Alaska National Wildlife Reserve to
exploration and development. It is believed that producible oil deposits exist in these
areas, but environmental concerns, the time lag required to complete development,
as well as whether the deposits would be significant enough to affect prices in the
current and future market, were critical factors in the debate.
Since the 1970s, the oil market has been both cyclic and volatile. Periods of
high prices have been followed by price collapses. Up and down turns in price have
been abrupt as well as drawn out. Policy proposals that assume that market behavior
is predictable and can be projected into the future, are likely to be of limited
Additionally, there have been many goals set out for oil policy, some of them
contradictory. For example, over the first half of 2008 there has been interest in
lowering gasoline prices, reducing oil dependence, and reducing carbon emissions
associated with global warming. Success in lowering gasoline prices would likely
increase consumption, which likely would lead to increased oil imports, given the
inability of the United States to increase production in the very short term. Increased
consumption of petroleum products increases carbon emissions which could make
the attainment of any desired emission target more difficult to obtain.
Market forces, both fundamental and financial, changed the direction of both the
prices of oil and gasoline. In the 16-week period July 7, 2008, to October 20, 2008,
national average gasoline prices fell from $4.165 to $2.914 per gallon, a decline of
more than 30%. NYMEX oil futures prices were $145.29 per barrel for WTI on July
3, 2008. On October 21, 2008, WTI was trading at about $71 per barrel, a decline
of about 51%. These declines in prices were as unanticipated as the price increases
from January through July. The oil market can be volatile and change direction
quickly. That these observed price decreases come as Russia invaded Georgia,
threatening oil pipeline shipments from Azerbaijan, unrest and violence continue to
occur in Nigeria, and other de-stabilizing factors affect the market, makes their
Should these declines in price persist, and reverse most, or all, of the price
increases that took place in the first half of 2008, the immediate pressure to control
oil and gasoline prices through government policy might be reduced. Nevertheless,
the market conditions that drove oil to record levels could quickly re-appear, if for
example, U.S. economic growth picked up.
Policy making in a volatile market is difficult. It may also be hard for the
industry to carry out a satisfactory investment plan that is consistent with policy
objectives. The capital intensity and high costs of major oil projects require target
prices to be attained to provide economic justification. In a sharply volatile market,
21 For more on this topic, see CRS Report RL33493, Outer Continental Shelf: Debate Over
Oil and Gas Leasing and Revenue Sharing, by Marc Humphries.
the industry might not respond in the desired way to a policy measure. For example,
policy measures that have the goals of increasing exploration and development of
new oil fields, or expanding the capacity the oil refining sector as a way to mitigate
high consumer prices, might not be undertaken by the industry if corporate planners
view high prices as transitory, and lower prices are incorporated in the company’s
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The personal income tax in its present form has its origin from the Income Tax Law of 1919, which was imposed to permanently strengthen the island’s revenue. Jamaica’s income tax is an important revenue source for its Government.
The residents of Jamaica and domiciled individuals are taxed on their worldwide income, whereas the non-resident individuals are taxed on their Jamaican-sourced income. A non-Jamaican domiciled individual is normally not taxable on foreign-sourced income unless it is remitted to Jamaica. A non-domiciled individual working in Jamaica has to pay tax on the compensation for services offered in and in relation to Jamaica as well as Jamaican-sourced income.
Although an individual is subject to tax on one’s income for a calendar year, he or she may take the Commissioner-General’s approval, TAJ, to file based on the fiscal year. 15th March is the due date for filing of Income tax returns in the year following the assessment year and is based on a system of self-assessment of the payable tax. Individuals expect that income tax will be payable by one’s self only in respect of salary need not file an income tax return. The income tax is generally filed separately by husbands and wives but they must elect in writing to be assessed normally.
Payment of Tax
Quarterly installments of tax are payable on the 15th day of March, June, September, and December of each tax year. These quarterly installments are based on the actual tax payable for the previous year or an estimate of the year’s liability. 15th March of the following year is the due date for the payment of the balance of income tax payable for a taxation year, post after deduction of the installments of estimated tax. The interest is charged on unpaid tax at a rate of 16.62%per annum.
If the amount remains unpaid and If TAJ issues an assessment., then a penalty of up to 50% can also be imposed. Income tax (PAYE) is withheld from emoluments. In case when the withholding is not possible as in the case when the employer is not resident in Jamaica, the taxpayer is required to pay the estimated tax in quarterly installments.
Personal Income Tax Rates
The nil rate threshold is JMD 1.5 million, which effectively means that the rate of income tax is nil for the first JMD 1.5 million. For annual income amount in excess of the threshold i.e JMD 1.5 million till JMD 6 million, the income tax is charged at a flat rate of 25%. The income tax is charged at a rate of 30% when the annual income exceeds JMD 6 million.
Income Tax is imposed on individuals only at the national level and is not separately imposed at the local level.
At the national level, Payroll taxes are imposed on salaries paid by employers to their employees, including (subject to certain conditions) expatriates working in Jamaica. The taxes are calculated as per the following table:
|Payroll tax||Basis||Employee rate (%)|
|PAYE Income Tax||Taxable income up to 6 million Jamaican dollars (JMD) per annum less the annual tax-free threshold||25 %|
|Taxable income in excess of JMD 6 million per annum||30 %|
|Education Tax||Taxable income||2.25 %|
|NHT contributions||Gross income||2.00 %|
|NIS contributions||Gross income up to a maximum of JMD 1.5 million per annum||2.50 %|
|HEART contributions||Gross income||N/A|
Virtually all developing nations have unequal distribution of incomes, and so does Jamaica. The role of income tax in Jamaica is the fulfillment of economic justice and economic progress.
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Who among us has not eagerly described the smart meter to a non-energy person only to be greeted by a blank stare, or worse the retort: “Why would I want to track my electricity costs all day?”
You try to explain the profound applications: smart appliances that talk to the power grid, consumer clubs that sell energy savings, your car serving as a power plant. But the conversation then becomes one about fascinating toys, not a world change.
A new paper by Joseph Stanislaw, independent senior energy advisor at Deloitte, eloquently gets to the real meaning of smart grid. Moving beyond the gadget talk, he describes the bigger picture, how new energy efficiency and smart technologies will democratize energy.
Energy efficiency could have “a greater impact on the global energy picture than any other development,” according to the paper, titled Energy’s next frontiers: How technology is radically reshaping supply, demand and the energy of geopolitics.
“The breakthroughs have been stunning, and often elegant in their simplicity. Among the least appreciated technologies are those that empower companies and individuals to understand and manage—and thus significantly reduce—their energy consumption. Last year, venture capitalists invested $275 million—up 75% from 2010—in start-ups that make software and other technologies to manage energy use,” the paper says.
Stanislaw explains how smart technologies are bringing about ‘the Power of One’ in the energy game. No longer passive receivers, consumers and businesses become active choosers; hence they influence the kind of generation plants we build – or if we build them at all – simply by the way they use electricity. Our market signals, not central planning, shape the infrastructure we build.
The Power of One idea often gets lost in political discourse about energy. Debate tends to focus on wind power tax incentives, solar trade wars, the pros and cons of hydraulic fracturing and access to public lands to drill oil.
But when it comes to electricity, it will be the Power of One that changes the playing field most by giving the individual control over energy, much the way the Internet gave us control over information. As a result, even if governments fail to act effectively, corporations and individuals now have the ability to “make a radical difference in their own consumption—and thus to materially influence the broader energy game,” the paper says.
More specifically Stanislaw explains: “The new energy-related software and hardware on the market and in development—smart meters, smart appliances, demand management programs, and so forth—liberate individual actors from being at the mercy of broader forces.” This liberation, or shifting of control over energy decisions from nations to individuals, transforms what has come to be known as ‘the Great Game’ – the wrangling of nations over energy supply.
While the Great Game previously focused on oil, technology is the new prize.
“The ‘Great Game of the 21st Century’ is the technology continuum driving along the development curve from 1.0 to 2.0 to 3.0—with each version coming faster than the one before. The future is one of continuous research and development, informed investment job creation, and greater energy security—without sacrificing the environment,” the paper says.
Rapid-fire technology change heightens the need for sustainability planning by businesses, he adds. And the ability to collect and understand data about energy becomes increasingly important. Whether the company makes shoes or semi- conductors, energy is part of its business. All companies become energy companies in a smart grid world.
Stanislaw describes a “virtuous energy cycle” that occurs for households and companies that pursue efficiency: They save money and protect the environment. Moreover, “the consumption of energy is no longer just an economic act—this is becoming a conscious act and an act of conscience. This will likely intensify in the coming years.”
Stanislaw’s paper is a good read. See it here.
Elisa Wood is a long-time energy writer whose work appears in many of the industry’s top magazines and newsletters. She is publisher of the Energy Efficiency Markets podcast and newsletter.
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If you’ve ever been waiting in line to pay and seen a customer wave or tap her debit card near a payment terminal to buy something, you’ve seen contactless payment. Many stores are moving to make payment easier for their customers—by eliminating the need for cash and allowing payment with a variety of devices, including everything from iPhone and Android smartphones to wearable devices primarily used for fitness tracking.
These transactions are possible because of something called near-field communication (NFC), a special payment technology that allows a card to receive and transmit information securely over a short distance when the cardholder makes a payment. Only requiring about 4 cm of distance between the card and card reader, NFC is fast and easy, allowing purchasers the ability to move through more quickly without entering a pin number and without requiring a signature.
Although contactless transactions are gaining in popularity and are an improvement to radio-frequency identification (RFID), many cardholders still question the security and benefits of contactless transactions.
Benefits of Contactless Payment
Challenges of Contactless Payment
- Paying is fast and convenient. Most new mobile phones, smart watches, fitness trackers, and some commercial key fobs are enabled with NFC technology. Users also spend less time waiting at the register by using tap and pay rather than swiping a card and using a pin or signing for a payment.
- In some ways, it’s more secure. Contactless debit (and credit) cards that contain NFC technology have layers of security, using encrypted data to transmit a unique transaction number.
- The card number isn’t used for the payment and merchants don’t use or store the card information in their POS terminal, so there’s less likelihood of a debit number being used in fraudulent transactions after being compromised in a data breach.
- Since cardholders don’t swipe, they also avoid fraudsters who collect data from gas station pumps, ATMs and other public terminals.
- Although contactless payment cards have been used globally for a long time, many issuers in the US are just now getting on board, so contactless payment isn’t accepted at every terminal yet. Users would need to know ahead of time which merchants are able to accept contactless payment and which ones require more conventional payment methods.
- Card issuers are working to raise awareness and make transactions easier, but some consumers may be confused by the new technology and how to use it.
- Many companies have a transaction limit, so users might still have to use a conventional payment method for larger purchases. Users should research their transaction limit by contacting the issuer ahead of time.
- Although the technology is improving, occasionally the connection may be poor, requiring a customer to swipe or sign anyway. Users would need to be prepared ahead of time with an alternate payment method.
- With the use of smartphones or wearable devices for contactless payment, it’s easier for the actual debit card to become lost or stolen.
For customers who make a lot of quick, digital payments as part of a daily routine, using contactless payment makes
sense—it’s faster, allows users to multitask with capability on other devices, and is a more secure transaction in many ways. For larger, more calculated purchases or in situations where a connection may be tenuous, it’s a good plan to have a debit card or credit card available for more conventional use (swiping or inserting). Users should speak with their issuing bank and research the specific form of contactless payment that may works for their use. Although it’s a complex technology, contactless payment has the ability to bring simplicity to many aspects of customer transactions.
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1.2 Tax Culture
The concept of ‘tax culture’ is complex and the term to some extent remains ambiguous. It has been defined in various ways involving elements of sociology, history and economics. Some economists do not recognize ‘tax culture’ as an economic term and dismiss it as an emotive expression. In taxation literature the term is often used to indicate an established tax system and is therefore attached with progressiveness and modernity of a tax system. It is also used interchangeably with the terms ‘tax morale’ and ‘tax discipline’. Thus a synthesis of various definitions of the term tax culture indicates a consciousness or awareness on the part of taxpayers of their obligation to pay taxes voluntarily. Nerré (2008) argues that the tax culture more specifically is the tax mentality which consists of tax morale and tax discipline and solely aims at the relationship of the taxpayer to the state in the context of taxation. In general, tax moral is a term connected with “willingness-to-pay taxes” or a feeling of obligation to the general public or community or state. Tax discipline then reflects the attitudes of the taxpayer in his or her actions
1.2.1 Impact of Cultural variations on Tax compliance
A national tax culture which appears synonymous with tax morale is a collective state of mind reflecting tax practices and behaviours resulting into establishment of relationship between tax state and taxpayers. Some theoretical models show that tax morale has been the intrinsic motivation to pay taxes. Tax morale evolves from the perception of individuals about the social, political and economic system. When taxes are perceived as unfair and few tangible benefits are received in return for taxes paid, then taxes cannot be collected voluntarily as a moral duty. Thus, the difference in tax morale among countries has significant impact on the level of compliance. Schneider and Torgler by their economic model confirm that a decrease of tax morale by 1 unit would lead to an increase in the informal economy by approximately 20 percent points. An experimental study utilizing surveys also found that tax morale has positive influence on compliances.
Tax morale is a conviction to contribute to society by paying taxes. Therefore, Schneider and Torgler term operating in the informal sector as an ‘attitude’ of a citizen towards tax obligations. They believe that the ‘attitude’ problem casts wider implications in the form of large informal economies as compared to the ‘behavioural’ issue (which is a driving force in tax evasion).
However, it is noted that the tax morale does change in response to changes in governments’ performance or changes in tax rates and tax burdens. Thus, to improve tax compliance, governments have to improve the delivery of their services including the operation of the tax system.
The above review of tax morale indicates that the compliance level depends on the quality of governance. The compliance can be improved by improving the governance and perception of fairness of tax system.
1.2.2 Tax Compliance Strategies
Tax compliance is the most intricate subject in taxation. Several strategies have been developed by academicians, tax administrations and tax policy makers to achieve maximum compliance. Tax compliance management is currently based on voluntary compliance by taxpayers through Self-Assessment Scheme (SAS). Some taxpayers are picked for audit to deter non-compliance under SAS.
As already discussed, the role of tax morale has a significant impact on the tax compliance. One-point increase in the tax morale increases the tax compliance for same level in a direct proportion. More simply, higher the level of tax morale, more the taxpayers comply voluntarily. Therefore, tax morale is vital for success of SAS and overall compliance management strategy. Government role in areas of tax administration and tax policy directly influences the tax morale and inter alia tax culture in a country. Whether introduction of tax amnesties for tax evaders can have impact on the morale of good or compliant taxpayers seems to be linked to the prevailing tax morale and quality of service delivery by the state institutions.
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When it comes to the fight against climate change, the insurance industry does not normally spring to mind.
It may come as a surprise to learn that the industry is not only one of the world’s biggest investors in fossil fuels, it is also highly exposed to the effects of climate change.
The UK insurance industry is the largest in Europe and the third largest in the world. The industry manages total investments that equate to 25 percent of the UK’s net worth, making it pivotal to our economy.
What makes the insurance industry's relationship with climate change so unique is the fact that the industry is built on the concept of managing risk.
With climate change set to be one of the greatest risks of them all, insurers stand to be impacted in significant and far-reaching ways. The Bank of England’s Prudential Regulation Authority has identified three key areas of risk for the insurance industry,many of which are already happening.
The first of these is known as physical impact risk, which relates to the increasing frequency and severity of extreme weather events across the globe. The specific types of weather events include hurricanes, extreme precipitation, tornadoes, landslides, mudflows, drought, wild fires, heat waves, flash floods and rising sea levels.
Aside from the human impact, which can be devastating, there is the substantial cost of repairing the damage caused by such events. The repair bill for Hurricane Katrina in 2005 was estimated to be £83bn. In 2016, according to Munich Re Insurance, losses from natural disasters worldwide totalled £142bn, only £39bn of which was covered by insurance.
Another side effect of the unpredictable weather patterns is that they will play havoc with future predictions and business modelling. Insurance companies currently rely on historical loss records as a means to guiding underwriting and pricing risks, however with the climate acting in a manner that is increasingly hard to predict, the historical data begins to lose its value.
Fossil fuel divestment
This second area of risk for the insurance industry relates to legal liability. Again this isno longer a future prediction, as litigation cases related to the climate are beginning to become reality.
The most notable example comes from the environmental law firm Client Earth. The firm has already targeted the UK's biggest pension funds with a warning that they could face legal action unless they properly take account of risks to their investment portfolios posed by climate change.
Client Earth has now turned its sights onto the insurance industry, and has already reported three insurance firms to the Financial Conduct Authority for failure to disclose climate risks.
In the United States, the city of San Francisco has potentially become the first US municipal body to try to force insurance companies to stop insuring and investing in fossil fuels, with a resolution entitled “Urging Divestment by Insurance Companies From Coal and Tar Sands Industries”.
Meanwhile, the Paris City Council passed a similar declaration earlier this year. The Council highlighted that major European insurance and reinsurance companies such as SCOR and Generalifirmlysupport, insure and invest in the coal industry in Poland.
As the reality of the climate change threat strengthens, the threat of litigation is certain to grow. The issue is not unique to insurance, with approximately 900 climate related lawsuits now underway in 24 countries, according to a survey by the United Nations Environment Program.
The third and final area of risk relates to investment and stems from the fact that the insurance industry is one of the world’s biggest institutional investors in fossil fuels.
Fossil fuels were long considered a ‘safe bet’ until climate scientists declared that the bulk of all known reserves had to stay in the ground if humanity is to limit global warming to 1.5ºC. The risk lies in these fossil fuel investments becoming what is known as stranded assets, which essentially means investments in coal, oil and gas could potentially suffer from a sudden and unexpected drop in value as society puts measures in place to prevent their use.
Whether it’s a drop in demand, new legislation or the threat of legal action, the sheer speed and unanticipated manner in which these factors could take hold could, at some point in the not to distant future, render the bulk of the insurance industry’s fossil fuel investments worthless.
In recognising the unique set of risks faced by the insurance industry, it also becomes apparent that the industry possesses an almost unparalleled ability to reduce the impacts of climate change.
This potential lies in two key areas. The first relates to the industry’s significant financial influence. By divesting of the vast majority of their fossil fuel assets, insurers could accelerate the process of decarbonisation by switching to low carbon technology. Such is the size and scale of the industry, that this would go a long way towards dramatically improving society’s chances of avoiding effects of catastrophic climate change.
The second area relates to what the insurance industry chooses to insure, or rather, not insure. Coal has been highlighted as the most carbon heavy of all fossil fuels generating not only nearly half of the world’s CO2, but also creating the most atmospheric pollution.
Research by Climate Analytics found that no more new coal projects can be built if we are to achieve the goals of the Paris Agreement, yet there are currently 1,600 planned globally. If the insurance industry was to cease underwriting such intensive fossil fuel production sites it is likely that many of these projects would never go ahead.
Today there are some positive signs from within the insurance industry, with big names such as Allianz recently pledging to immediately withdraw from insuring single coal-fired power plants and coal mines, either in operation or planning.
Unfortunately when it comes to the climate change time horizon, the very industry which could have more impact than any other is clearly not taking action quickly enough. Even the bold pledge by Allianz has significant limitations, as the company also stated it will continue to insure businesses that generate power though multiple fossil fuel sources, including coal, until 2040.
At the present time, it is very difficult for consumers to apply sustainability criteria when choosing an insurance provider.
Whilst Naturesave has been pushing the sustainability agenda for many years it is no longer alone. Public opinion has now firmly shifted its stance on sustainability, as demonstrated in some recent research by YouGov, which found that almost two-thirds of people think the UK government is not doing enough in adapting to climate change.
More than eight in ten hold the view that fossil fuel companies who knew about climate change early on, yet continue to lobby against taking action, should be held responsible for some of the costs of major weather events.
The poll also revealed that sixty percent of those polled were interested in a financial institution, such as a bank account or pension fund, that considers the climate change impacts of the companies it invests in. A similar number thought investing in fossil fuel companies was risky long-term, and more than half thought such companies could not be trusted to change their business model.
This research highlights a strong belief at Naturesave, that there is now a significant opportunity to create a sustainable low carbon insurance offer, supported by more sustainable and ethical underwriting and investment behaviour.
Looking at other leading industries, it appears the insurance sector is now lagging behind.
Research conducted by the Asset Owners Disclosure Project highlighted that one in four pension funds is taking tangible action to manage climate risk in their portfolio compared to one in eight insurance companies. The research also highlighted that only 8 percent of insurers have staff dedicated to integrating climate risks into the investment process, compared with 16 percent of pension funds.
Like the insurance industry, the banking sector is closely linked to the fossil fuel industry, and has also come under criticism from the Bank of England’s Prudential Regulation Authority. However, the banking sector is now offering ethical and sustainable personal banking choices from brands like Triodos, the Co-op and the Ecology Building Society.
In the energy sector, a growing number of start-ups are focusing on what consumers increasingly want: 100 percent green, affordable energy. This is further proof that more consumers want services that do not contribute to climate change.
Recent research from the price comparison website Compare the Market highlighted the fact that three quarters of consumers are willing to spend more money with a provider that uses only renewable sources, over a provider that uses non-renewable sources.
There is no known risk greater than climate change, which makes the industry built on managing risk itself uniquely placed to lead the charge to combat it. With a little nudge from consumers, the insurance industry could make a material difference to all of us.
Nick Oldridge is a committed environmentalist and responsible for communications at ethical insurance provider Naturesave and its charitable arm, The Naturesave Trust. Stay updated by following @WeAreNaturesave on Twitter.
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Responding to the challenge of plastics
Learn how organizations are dealing with the complex issues associated with the plastics economy
Responding to the issue
The linear ‘take-make-dispose’ model of plastics means that products are manufactured, bought, used once or twice and then thrown away. This is unsustainable in the long term.
Discarded plastic leaks into streams and rivers, ultimately ending up in the ocean and devastating marine life. But the use of plastic is essential, particularly to prevent the alternate problem of food waste.
Plastics have become pervasive through our economy, and we need to tackle the underlying issues if we are to create a more circular, sustainable economic system.
Reducing usage is only part of the solution. We need to invest in material innovation and reuse, recovery and recycling infrastructure.
Embedding plastics into financial decision making
Many organizations recognize that they have a role in changing the current economy of plastics. These organizations are exploring alternative materials, setting reduction targets (with many signing statements of intent in the public domain), or working to recover and reuse plastic resources.
Finance teams have a crucial role to play in responding to the challenge of plastics, such as through corporate reporting, budgetary allocation and by embedding plastics into their financial decision-making processes.
Members of the A4S CFO Leadership Network have created in-depth worked examples to show how they have responded to the complex issues associated with the plastics economy. In particular, the examples capture the practical actions that finance teams have taken, the challenges they have come up against and the solutions they have applied.
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About Jean-Francois GautrinJean François Gautrin is an associate research fellow at the Malaysian Institute of Economic Research.
By Jean-Francois Gautrin. Posted March 5, 2018
The New Silk Road Initiative was originally unveiled by Chinese President Xi Jinping in 2013 and became known as the Belt and Road Initiative (BRI). From the beginning, the initiative was presented as a reestablishment of the trade routes that were successful many centuries ago. The initiative was also a call for partner countries to accelerate transport infrastructure improvements and connectivity to boost trade. Through active diplomacy and intense public relations, 65 countries felt they had to join the initiative with the prospect of Chinese financial assistance.
By Jean-Francois Gautrin. Posted March 9, 2016
Despite strong linkages in the past during the colonial period and strong ethnic and traditional ties, South Asian countries have become increasingly more diverse since their independence. While they are geographically closely connected, this does not mean that they are well integrated. Countries in the region have vastly different sizes, populations, and topography, and there are significant differences in their economies and income per capita. The conditions, however, might be ripe for a boost in regional integration. Implementing highly visible and symbolic transport connectivity projects, which have long been considered as dream realizations, would trigger the acceleration of regional integration for the benefit of all.
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Foreclosure is a legal procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default in terms of payment / s. When a person fails to make timely payments on a property which is mortgaged as security, the bank or any other financial creditor may sell the said property to recover the default amount.
Home Foreclosures are of three types:
- Strict home foreclosure
- Judicial home foreclosure
- Non-judicial home foreclosure (foreclosure by power of sale)
The original method of foreclosure was strict foreclosure. Under this method, when the homeowner fails to pay the loan, the bank or financial creditor gains the mortgaged property automatically without selling it within a certain period of time. But now it is available in few places only.
The widely used methods of home foreclosures are foreclosure by judicial and non-judicial home foreclosure. In foreclosure by judicial, entire processes are carried out under the supervision of a court. Here the sale of the mortgaged property is done in a short trial by pleadings and various judicial decisions.
But a non-judicial foreclosure does not involve court supervision. It is also known as foreclosure by power of sale. Here an agreement is formed in which either the homeowner can stop home foreclosure by paying back the amount or the payments can be delayed for sometime subject to prior consent of both parties in question, that is borrower and lender.
A home foreclosure occurs when the borrower fails to pay the mortgage expenses and the lender or the banker decides to execute the terms of the mortgage to recover his loss by putting the borrower's house for sale. When the borrower fails to pay the due then all the power and the control of his home goes in the hand of the lender or the banker who had given him loan, then the mortgage company or the bank, to get back his balance amount forces to put the borrower's home for public sale through auction. There are many ways how a borrower or the homeowner can be safe of home foreclosure.
Losing a home is devastating both financially and emotionally for any individual. Due to a major increase in unemployment and housing boom, foreclosures have been raised by almost 50% within the last year.
Banks, lenders, government and different financial institutions are all trying to help homeowners to save their property and rectify the problem by introducing different plans for those in a state of serious financial inconvenience.
Following are the plans:
- Loan workout plan- In this plan, a deadline is provided so that the homeowner gets sufficient time to pay off the debt.
- A 12 to 24 months long repayment plan is there for the unemployed. However, an additional interest is charged in this case apart from the actual loan amount.
- A maximum of 18 months suspension of payments can be extended to those who have excellent track record in bill payment.
Home foreclosure can be avoided in the following ways:
- A pre-planned budget should be laid out in accordance with the current salary of the potential buyer.
- Save at every opportunity.
- As you receive your salary, set aside the monthly payable amount for the mortgage.
- Consistency in payment should be maintained in order to avoid payment defaults.
- There are various sites offering information on foreclosures, always go through it before buying a house.
- Once your home is declared in the foreclosure name list, sell the property immediately to avoid home foreclosure.
Although foreclosure is the worst possible situation for a homeowner, it is also a golden opportunity for those who are interested to buy foreclosed properties either as an investment or simply to buy a house. The reason being, that these homes are available at low costs at desirable rates of payment.
To find a foreclosed property is not hard, just browse online and go through the declared list of the foreclosure properties. The up-to-date data will provide you with detailed information about the offers. These properties can be available in two ways, either through auction or before the auction, ie by checking the list of the owners from online and convince them personally to sell. This way there is a high probability of getting the house at lower rates than usual.
Home foreclosure is an expensive process. Sometimes lenders also sell the property at a loss to avoid foreclosure. Thus from a foreclosed property, one can make a great start investing in Real Estate.
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What is a notary?
The notary is an indispensable and fundamental figure in the buying or selling of a house in Spain. It is important to know the notary’s functions, responsibilities and rights before you embark on the purchase or sale of a home.
Notaries are public officers or civil servants who are required to provide legal security for their clients. In the same way, according to Spanish law, they can exercise this in any modality in which they are authorised. In fact, notaries derive their authority directly from the Directorate General for Registers and Notaries (DGRN) of the Spanish Ministry of Justice.
Regarding their functions, responsibilities and rights, notaries exercise public notarisation and grant the citizens with legal counsel related to all aspects of private law and write documents relating to legal acts and business with accuracy and according to their clients’ interests.
Much of notary business relates to notarial deeds relating to business transactions, and one of the most common operations is the buying and selling of houses, with or without a bank mortgage.
What a notary does?
Prior to the signature, the notary will always ask the parties for their DNI number (or NIE and passport in the case of foreigners in Spain) as well as all the original powers of attorney if they existed and all documents required by law that are necessary to carry out the notarial signature or the authorisation of notarial public instruments.
In the acts, the notary limits him or herself to the notarisation or legal documentation of all the facts that he/she perceives and as well as those facts which, without being perceived, can be proved. The notary can be labelled as an impassive professional who only applies the prevailing law, and who does not see nor examine the financial records regarding the economic situations of those involved in the transaction. In the same way, the notary does not deal with personal situations. He/she just reads the legal contract.
After the signature in the notary by both parties and the signature of the notary, these documents acquire probative value from that moment onwards, and their legality is presupposed.
In this document, all information related to the operation is gathered: Data from the participating parties, details regarding the object of the contract, method of payment, the guarantees acquired, etc. The original operational documents are attached to the deeds as certified copies by the same notary.
The notary will keep the original documents secret, providing copies that might be requested by the participating parties as needed.
Regarding the expense of notary services: The assessment services are always free and they are considered a duty of the notary to serve all the people that may request them, except for some exceptions defined under the law.
Notary service costs
Regarding notary service costs, we should make clear that although the notary’s bill can seem high, it is not much compared with the total expenses of most operations. For example, in the acquisition of a home, a buying and selling deed does not exceed 1% of the investment, in the case of a simple buying and selling transaction with no mortgage warranties, etc. However, the law allows for the signature of duties to defray all notarial activity. The notary must inform about his/her fees prior to serving these costs.
Regarding the choice of a notary public: The user has permission to choose the notary that will publicly notarise the operation, for example in the buying and selling of a home. In fact, in some occasions, the developer can even try to impose their notary but it is the final buyer who chooses which notary professional he or she will entrust with the notarisation.
In the case of a conflict of interest, the notary will be chosen by the party who must face the whole of notarial costs or the bulk of these expenses.
Notary public in Spain
In Spain, there are over three thousand notaries, in both big cities as well as smaller towns. There is a notary guide which permits people to check and verify the authenticity of any notary professional.
The signature of buying and selling home deeds of is a measure of the national economy, and its role deserves to be highlighted. There are also other operations in which notaries intervene: inheritance proceedings, granting of powers, mortgage loans and the creation of mercantile societies, a variety of legal agreements involving trade and change of property, protest bills of exchange, promissory notes or checks. Also, the new voluntary jurisdiction law on the books since July of 2015, allows the notaries to marry and divorce citizens.
By Massimo Filippa
Information given is offered for information purposes, excluding the company and the author from all responsibility, and does not constitute an official publication nor will it be legally binding. We always recommend checking with your lawyer or adviser.
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A mortgage is undoubtedly an interest in land designed by a agreement, not a mortgage. Far more specially, a house loan is actually a variety of safety for the financial debt. Whilst Pretty much all mortgage loan agreements consist of a assure to repay a debt, a mortgage loan is not really a debt by As well as in alone. Far more importantly, a mortgage loan is often a transfer of the authorized or equitable curiosity in land, about the condition sine qua non which the interest are going to be returned if the phrases with the house loan contract are done. This proper in the borrower to repay the lender when the conditions on the mortgage deal are entirely contented is understood, at legislation, as fairness of redemption.
Home loan Legislation originated within the English feudal program in close to the twelfth century A.D. Inside the early part of the English feudal period of time, the lawful impact of the house loan was to Express into the lender both of those the title of an curiosity in land and the actual possession with the land. This conveyance was complete, issue only towards the lender’s promise to re-convey the assets towards the borrower, if the desired sum from the underlying personal debt was repaid from the date set out from the house loan agreement. In case the borrower did not adjust to the conditions, the fascination in land became the lender’s, as well as the borrower had no further declare or recourse on the house.
Because the regulation at that time didn’t acknowledge an agreement as protection for any debt, the land and possession of it needed to be transferred towards the lender, In order to supply him with stability. There were two different types of mortgages: a vivum vadium (Latin for ‘Are living pledge’), in which the profits from your land was employed by the lender to repay the debt, and also a mortuum vadium (Latin for ‘dead pledge’), the place the lender kept the cash flow as well as the debtor had to boost money somewhere else. The ‘Are living pledge’ was acceptable at law, even so the ‘lifeless pledge’ offended the prevailing legislation versus usury, together with Canonic regulations.
A lot, for that reason, for that more or less partisan misinformation of customer advocates, who feel that governments established home loans to complement themselves in the costs of your inadequate.
Mortgages were being dealt with otherwise at prevalent legislation than through the courts of equity. Popular legislation took the check out that home loans, like almost every other contract, had to be carried out exactly according to their phrases. This intended, that if the borrower was even in the future late in creating a payment, the curiosity in land was forfeited to the lender and nevertheless the borrower was continue to responsible for the personal debt.
The courts of equity, Alternatively, altered equally the connection of the get-togethers to the mortgage loan agreement and also the remedies accessible in case of default. These courts recognized which the mortgage was only stability for just a loan and, therefore, they limited the lender’s right only to the desire to the bank loan, and more needed him to make a complete accounting of all revenue from the land when he was in possession.
Due to this equitable interpretation with the courts, the lender now not acquired an actual advantage from possession in the land. Possession, Put simply, was of price provided that the borrower didn’t honor the deal. With this particular authorized development, On top of that, the borrower was vested with the right, in essence, to possession on the land and also to comprehensive usage of its income to pay interest and to raise principal for personal debt repayment.
Lastly, the courts of equity also transformed the rights of a borrower who did not repay in time, by the event of what at present is referred to as The Doctrine From the Fairness Of Redemption. This doctrine will allow the borrower the right to repay the personal debt and get back the house even after the contractual day for repayment has lapsed.
Due to this, Additionally, the Courts want to be fully satisfied which the lender, the truth is, has presented all achievable remedies and venues of redemption into the borrower just before granting an Order Absolute Of Foreclosure. As this entails sizeable legal fees about the Portion of the lender, expense of guy/hour, fascination accrued That will not be recoverable in its entirety and also expense of chance, lenders perspective foreclosure because the recourse of very last vacation resort accessible to them.
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There’s never been a better time to be alive if you’re curious. When I wanted to learn something outside of school as a kid, cracking open my World Book encyclopedia was the best I could do. Today, all you have to do is go online.
Online education has revolutionized the way we learn. On the one hand, students have nearly unprecedented access to undergraduate and graduate degrees, which provide flexible scheduling, opportunities for accelerated completion times, and affordable alternatives to traditional on-campus degrees.
At the same time, as entrepreneurs question the value of a traditional four-year college degree, online courses in specific trades and skills could represent the bigger innovation. Need to learn how to code? Some of the most popular MOOCs cover advanced and beginner programming languages: a good way to boost your resume as well as pick up a potentially lucrative and in-demand skill.
Maybe you want to pick up a new hobby — there are over 1,000 online cooking classes — or master a new discipline at your own pace. Regardless, online education empowers students, professionals, and hobbyists in every field, at every level. Pair that with the current state of MOOCs and a general trend toward flexible, affordable instruction, and Bill Gates’s enthusiastic endorsement rings true: there’s never been a better time to learn a new trade or skill online.
Job Prospects and Salaries for Business and Management Graduates
According to the US Bureau of Labor Statistics, skilled trade careers are expected to grow around 10% over the next decade. One reason is purely demographic: baby boomers are retiring, leaving employers in manufacturing, engineering, and construction in dire need of new workers to fill the employment gap (which by some estimates could be 31 million jobs).
But the definition of skilled trade jobs has also changed over the last few years. Advances in technology have opened dozens of new fields and potential career paths, and people are increasingly turning to the gig economy for side jobs, paid hobbies, or even full-time careers. Further, a recent report by The Federal Reserve Bank of St. Louis argues skilled trade workers are essential to small business growth:
Demand for employees in the skilled trades corresponds with the need for entrepreneurs and small-business owners to create businesses to employ those workers. It is also a major economic opportunity for individuals who have successfully learned a skilled trade to start their own business as a career pathway.
Still, education is critical:
It’s very challenging to create a successful enterprise if the workforce is not prepared or adequate to meet the demand. Better career training not only helps businesses grow, it can also help to create more small businesses when entrepreneurship is paired with on-the-job training, apprenticeship, and increasing entrepreneurial and business skills as part of the career pathways pipeline.
The takeaway: Jobs opportunities are growing for skilled trade workers, but demand for quality training and education is also on the rise.
Common Jobs for Skilled Trade Worker
As mentioned, the Bureau of Labor Statistics identifies traditional “blue collar” jobs under the skilled trade umbrella: carpenters, electricians, operating engineers, machinists, HVAC technicians, and other industrial and construction workers. But the BLS and Michigan Department of Technology, Management and Budget outlines over 50 trade occupations (which could expand in the future), including the fast-growing skilled service sector: roles like dental hygienists, medical technicians, administrative assistants, chefs, and even commercial pilots.
If we include a broader range of skill-oriented professions — particularly in areas which offer online training — the list gets bigger: IT workers, nurses, entry-level business analysts, accounting professionals, and more. The fact is, online education has already expanded trade workers’ career options — and experts project continued growth.
Common Courses of Study for Learning a Trade or Skill Online
We’ve touched on hobbyist cooking classes and high-paying skills your can learn online: from coding and data analysis to professional writing, design, and basic financial literacy. But what about some of the most popular courses for learning skills online?
- Healthcare and Nursing is a common online learning track. If you’re a practicing nurse with an associate’s or diploma, the online RN to BSN is a logical choice; degree completion time is just 1-2 years, and nearly all students continue their careers alongside the program. (Still, given the variety of tracks, it could be useful to review our guide to choosing a nursing degree.)
- Management is another in-demand skill, with numerous online certificate opportunities in project management, information technology, and more. While most certificates require advanced coursework, they’re highly practical and valuable to employers. Especially if you have previous knowledge or experience in a management area, certification can boost your resume, increase job prospects, and bump your salary.
- Blockchain and Bitcoin courses have exploded in recent years, in part because each are conducive to online learning. In addition to lessons for developers, you’ll find intros to Bitcoin and blockchain basics tailored to students with little to no prior experience. If you’re really interested in learning a valuable skill online, this is one of the best areas to do so.
Common Degrees for Learning a Trade or Skill Online
If you’re interested in skill-oriented degrees:
- An online Bachelor’s in Computer Science or Computer Information offer solid career prospects, including six-figure salary potential and above-average growth.
- Online business programs are plentiful, including bachelor’s degrees in Business Administration, Marketing, and Accounting. These degrees also tend to offer specialization options, hands-on skill building, and generous transfer credits for students with pre-professional degrees or prior work experience in administrative or entry-level roles.
- The Bachelor’s in Education is a popular track as well, with specialization options and licensure tracks.
Common MOOCs for Learning a Trade or Skill Online
Last but not least, more and more for-credit MOOCs are offering degrees and credentials in IT and service trade areas: financial management, analytics, cybersecurity, machine learning, sustainable energy, and more. Better yet, accredited MOOCs have the advantage of unprecedented affordability — Georgia Tech’s MS in Computer Science is a fraction of competing degrees’ costs — high-quality educators, including Ivy League universities, and partnerships with some of the most prestigious companies in the world: Google, IBM, GE, Goldman Sachs, Amazon Web Services, Amnesty International, Microsoft, and Ford, among them.
Popular Online Universities offering Skill and Trade-Related Degrees
- University of Maryland University College
- Ashford University
- Liberty University
- American Public University System
- University of Phoenix
- University of Massachusetts Online
- Walden University
Find the Right Business Degree
Peruse the most popular online business programs as well as our rankings of the best business schools above.
Looking to contact a program today?
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Power Cost Adjustment (PCA)
East Central Electric includes on its electric bills to consumers each month a charge called the Power Cost Adjustment (PCA).
The PCA reflects the changes in the cost of producing electric power from our wholesale power suppliers which is largely caused by changes in the cost of fuel for generation of electricity.
These wholesale power suppliers obtain their electricity from many sources.
Part of the power is produced at hydroelectric dams, and power purchased at this source fluctuates widely with the amount of rainfall.
Most electric power, however, is produced by steam generation plants which use coal, natural gas, and oil as fuels to produce the steam that turns the generators that produce the electric power. The Oklahoma Corporation Commission has developed a Power Cost Adjustment formula; most all the state's 28 Rural Electric Cooperatives and other power utilities are using it.
The adjustment passes on the difference between the actual cost of wholesale power each month and the base cost used in determining rate schedules. The formula charges all consumers equally for increases and decreases in the cost of producing electric power. It is important to realize that it is not due to a change in your electric rates, but due to the changing costs of the fuel used to generate the electricity that you use.
The Cooperative's base wholesale power cost used in determining rates is 41 mills per kWh. Billing statements are adjusted each month by the amount the Cooperative's average cost per kWh purchased varies from this amount.
Members can calculate their own Power Cost Adjustment each month by multiplying the "factor" (indicated as Power Cost Adjustment on the electric bill) by kWh used for the billing period. This "factor" changes each month, depending on the average price paid to wholesale power suppliers.
To summarize, the PCA:
-Is not a change in rates.
-Does not make extra revenues for your cooperative.
-Covers the monthly change in the cost of fuel that is used to generate some of your electricity.
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Indonesia and its more than 260 million citizens are exposed to a climate which is mostly Tropical. The average temperature across the more densely populated islands of the archipelago is relatively stable today around 28 degrees Celsius year-round. Climate change projections at 2050 forecast that there would be 93 more days above 27.5°C under an RCP 8.5 scenario of global warming.
Considering the already hot temperatures, households in Indonesia use few cooling appliances so far. While as a foreign traveler you may get the impression that Air Conditioning is quite widespread in Indonesia, less than 5 percent of households have Air Conditioners installed, as depicted in the figure below. Looking at the same figure, you can notice that the vast majority of the Air Conditioners can be found in households at the very top of the income distribution, while middle class households still live mostly without them.
Refrigerators are a more basic appliance and are thus more common, but not as much as one could expect. Again, the ownership rates still depend strongly on income and only 35 percent of households on average do have a refrigerator at home. The ownership curve is clearly steeper than the one for Air Conditioning, s-shaped but surprisingly flattens out at a 70 percent ownership rate at the very top of the income distribution.
Thinking about the prospects of future cooling demand, two major factors will be at play. First, demand for AC and refrigerators is highly dependent on income growth. With sustained economic growth, ownership rates are likely to grow along an s-shaped path with possibly higher growth rates expected for high income households. Second, it will be critical to see how households actually react to changing climate conditions.
Within Energy-a we are currently combining climate data analyses with household survey data to shed light on this aspect, and we will post the first results in Spring 2019.
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The new energy paradigm
November 29, 2017 by Denis Pombriant
One of the more interesting free market responses to climate change has been a reexamination of how we distribute energy. Generally the fossil fuel paradigm is a vertically integrated network of miners and oil producers, retailers and utilities. But we’re moving to a distributed paradigm of energy development and consumption and that’s important.
Solar panels on your roof are a great example. They generate power and send it to the grid or it can be used locally so they straddle a paradigm. The area making the earliest advances in decentralized energy may be the data center, or more precisely the data center that sells its waste heat to a neighbor that needs to warm a building.
Last week The Seattle Times ran a story about how Amazon’s new headquarters would be heated by a 34-storey building near by that houses telecommunications data centers. The arrangement will take waste heat from data centers where it’s not wanted and bring it to where it is needed to heat 4 million square feet of office space and saving 4 million kWh per year.
This is not very high tech and that’s a good thing. It represents some of the low hanging fruit that’s in every city and it’s a short step away from geothermal heating which harvests heat from the earth.
This arrangement is called district heating for obvious reasons and it’s been around since ancient times. The city of Chaudes-Aigues, France has been tapping heat from thermal vents since the 14th century and there is evidence that the Chinese did so much earlier. The Romans were famous for their baths and the city of Bath, UK got its name because the Romans built baths there fed by hot springs.
At any rate, there’s a lot of heat energy available if you know where to look and if you have a use for it. Data centers are prodigious users of electricity, which gets converted into heat. But data centers are not the only heat producers worth contemplating and Amazon is not the only tech company getting into the act.
Facebook is working to produce a district heating system for the Danish city of Odense. That’s for the city, not a few houses. And there’s an effort under way that would develop district heating for most of the UK and save nearly £30 billion in capital costs along the way.
Interestingly, this energy revolution is less about technology than it is about business models and legal processes. Contracts are bringing together willing partners and local governments are lending a hand by cutting red tape or allowing pipes to be run under roads.
What we’re seeing is the commoditization of the energy sector. It sounds strange to say since we’ve mostly thought about energy as a commodity of one sort or another. It’s crude oil or coal or gas or electricity produced to a standard like 120 volts or 87 octane. But by decentralizing energy distribution and letting the free market capture and make various forms of energy we’re moving away from the vertically integrated and highly branded model towards something that’s green, renewable, and good for the planet.
It might not seem like much but this is how revolutions happen. A small group gets an idea and makes it work. Then others copy the success and if you do this enough the world changes.
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Comstock Images/Stockbyte/Getty Images
Net cash from operating activities refers to the relative change in a company's cash position from one period to the next created by operating activities. Operating cash flow offers a stronger depiction of company financial health than net cash from financing and investing activities.
Net Cash Basics
During a month, quarter or year, a company conducts regular business operations that lead to cash inflows and cash outflows. Inflows from operations are generated through the sale of goods and services. Outflows include costs of goods sold and fixed operating expenses. The difference between the cash inflow and outflow is the net cash flow, or operating cash flow. A positive cash flow means the company is generating cash from operations that it can use for ongoing investment and development.
Sales and purchases of assets, dividend distributions and stock buybacks are among the non-operating activities that affect cash flow. While these activities impact the net cash flow for the period, they aren't typically ongoing activities like those included in the cash flow from operations calculation. One reason a company distributes dividends to shareholders is because leaders feel confident in the current cash position as well as ongoing net cash flow. Improving revenue and trimming COGS and fixed costs are primary means to improve net cash from operations.
- Morningstar: Cash Flow from Operations
- AccountingCoach: What is Cash from Operating Activities?
- U.S. Securities and Exchange Commission. "Beginners' Guide to Financial Statement." Accessed Mar. 19, 2020.
- Office of the Washington State Auditor. "Statement of Cash Flows." Accessed Mar. 19, 2020.
- U.S. Securities and Exchange Commission. "AT&T Form 10-K 2012." Accessed Mar. 18, 2020.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.
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26th May 2017
Author: Marianne Lehnis
A weak or non-existent El Nino could bring another above-normal hurricane season this year, potentially causing significant re/insurance payouts, as Forecasters at NOAA’s Climate Prediction Center say weather conditions point towards a hard-hitting Atlantic hurricane season.
The chances of an above-normal Atlantic hurricane season – the season running from June 1st through November 30th – is set by forecasters at 45%, while a near-normal season is only 35% likely, and a below-normal season has just a 20% chance of occurring.
Gerry Bell, Ph.D., lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center, said; “The outlook reflects our expectation of a weak or non-existent El Nino, near- or above-average sea-surface temperatures across the tropical Atlantic Ocean and Caribbean Sea, and average or weaker-than-average vertical wind shear in that same region.”
The average season produces 12 named storms of which six become hurricanes, three of which are likely to be major hurricanes.
Forecasters predict a 70% chance of 11-17 named storms with winds at 39 mph or higher, of which 5 to 9 are expected to turn into hurricanes with winds at 74 mph or above, and 2 to 4 major hurricanes.
These numbers include Tropical Storm Arlene, a rare pre-season storm that formed over the eastern Atlantic in April.
Atlantic hurricanes are usually suppressed by strong El Ninos and wind shear, so a weak El Nino points towards an above-average active hurricane season.
In addition, warmer sea surface temperatures fan the flames of hurricanes – making them grow in intensity as they move across the ocean, and with the Gulf of Mexico at record-high temperatures, the conditions appear set for heavy duty hurricanes and storms, which could hit vulnerable states and translate into above average insurance and reinsurance catastrophe payouts.
However, NOAA forecasters said, that while this scenario is the most likely to occur, the comparable probabilities for an above and near-normal season still show considerable uncertainty.
So although a hard-hitting catastrophe season for U.S. re/insurers is possible, it’s not yet set in stone and the coming season could see a fluctuation of intensity of storms and hurricanes.
Categories: Tropical Storms
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2035 is only 16 years away, and if projections are accurate, we will see a country that looks much different than today. According to the American Petroleum Institute (API), by 2035 natural gas production will nearly double to over 130 Bcfd (3.6 x 109 m3/d), requiring US$12.3 to US$19 billion in annual capital investment for oil, gas, and natural gas liquids (NGLs) infrastructure development. Even more optimistically, the Interstate Natural Gas Association of America estimates that North American midstream operators will spend an estimated US$27.5 billion annually on oil, gas, and NGL infrastructure over the next 20 years. Both estimates signal added growth for the nation that has already increased petroleum and natural gas production by nearly 60% since 2008.
Industry investments will be allocated to 218,000 to 240,000 miles (350,000 to 386,000 km) of gathering lines with 23 to 29 million hp (17.1 to 21.6 million kW) of compression. After moving hydrocarbon products to processing plants, between 27,000 and 45,000 miles (43,000 and 73,000 km) of transmission and distribution pipelines with 10 to 12 million hp (7.4 to 8.9 million kW) of compression will be replaced or added throughout the period.2 Currently, transmission lines total hundreds of thousands of miles to connect upstream production with downstream refining, processing, and distribution facilities.
For many applications, the industrial world will be increasingly powered by natural gas and renewable energy sources. This bodes well for the gas compression industry, which will be responsible for engineering lower-emission and higher-power engines as well as improving gas turbine compressors and adopting reciprocating compressors. From coast to coast, this will be a nation largely powered by natural gas. The burden of increased compression falls on the compressor stations themselves. There are more than 1360 compressor stations operating on over …
This article appears in the August 2019 issue of Gas Compression Magazine. You can read the entire article right now by clicking the link above.
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Five Principles for Interpretation of Contracts
There was a contract between a Norwegian and a German company for supply of 200 tonnes of haaksjoringskod. This substance could mean shark meat or whale meat. When the German company entered into the contract, the German company intended to import whale meat. However, the Norwegian company thought that the term referred to shark meat and exported it. German company refused to take delivery.
The Court adopted the Objective approach here. Lord Hoffman laid down five principles for interpretation of contracts as listed below-
- the right meaning is what the document conveys to a reasonable person;
- this includes everything in the “matrix of fact”, or relevant background circumstances;
- prior negotiations are excluded from this (a point which has been much criticised since);
- the meaning of words is not a literal meaning, but the one reasonably understood from the context, and
- the meaning should not contradict a common sense view of what a contract required
These principles may be summarized as follows-
- Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
- The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
- The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
- The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd. 2 WLR 945)
- The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in The AntaiosCompaniaNeviera SA v SalenRederierna AB 1 AC 191, 201- “… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”
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In 1988, Congress authorized the first grant program intended to help local jurisdictions and states mitigate the effects of natural hazards. From time to time, additional funds have been authorized by Congress, although generally they are intended to achieve similar purposes and are administered in the same manner.
Pre-Disaster Mitigation Program (PDM)
Authorized by the Disaster Mitigation Act of 2000, Pre-Disaster Mitigation grant program funds are expected to be appropriated each year to support a grant program that is funded regardless of disaster experience. As of mid-2003, the regulations for the program were not promulgated, although they are expected to be similar in most respects to the Hazard Mitigation Grant Program (below). The most significant difference will be that the funds made available will not be allocated by the state immediately after a disaster, but awarded on a nationwide, competitive basis.
Hazard Mitigation Grant Program (HMGP)
First authorized in 1988, the Hazard Mitigation Grant Program (HMGP) funds become available after major disasters. The amount of funding is determined as a percentage of certain types of federal assistance (e.g., emergency support, assistance to repair public infrastructures, and assistance to individuals and families). HMGP provides up to 75% of eligible costs, the remaining 25% must come from other, approved sources that may include, including in-kind and property owner contributions. Eligible grantees include local jurisdictions and certain private non-profit organizations.
Eligible projects must solve a given hazard problem, be cost effective, conform with environmental regulations, meet all applicable codes and standards, and be supported by state and local mitigation plans. For the most part, HMGP funds have been used by local jurisdictions to address flood hazards, primarily through acquisition of flood-prone houses and land. Other eligible projects have included elevation-in-place of flood-prone houses, floodproofing of public infrastructure, floodproofing of non-residential buildings, and drainage improvements.
Flood Mitigation Assistance Program (FMA)
Specifically authorized by Congress in 1994 to fund projects that are “in the best interests of the NFIP,” the Flood Mitigation Assistance Program (FMA) is funded each year by Congress, regardless of disaster declarations. Funds are available to support planning, technical assistance, and projects. In recent years, considerable focus has been on projects that address properties known as “repetitive loss properties.” These are properties that have received two or more flood insurance claim payments above a certain value. States receive an annual share of funds from FMA that can be used for acquisition/demolition of flood-prone buildings; elevation-in-place, relocation, or floodproofing of structures (including public structures); and minor flood control projects that do not duplicate activities of other federal agencies.
The City of Pearland Hazard Mitigation Plan will be posted on the City’s Web site and notices of its availability will be distributed to the following:
The federal and state agencies that were notified and invited to participate in Plan development (see Sec. 1.3);
Adjacent counties and cities;
Citizens who attended public meetings and provided contact information; and
The organizations, agencies, and elected officials who received notices of public meetings.
Through the mitigation planning process, the Pearland Departments that are involved in managing hazards and implementing measures to minimize future risk considered a range of mitigation actions. High priority actions were identified and prioritized, and are shown in Table 7 2.
For each mitigation action, Table 7-2 identifies the lead agency, support agencies, priority level, and time period for implementation. Each lead agency is responsible for factoring the action into its work plan and schedule over the indicated time period. Annual reports on the status of implementation, including obstacles to progress, will be submitted by lead Departments to the Pearland Emergency Services Department.
9.3 Monitoring & Progress Reports
As part of its responsibilities as described under Annex P of the Pearland Emergency Management Plan, the Hazard Mitigation Coordinator is charged with monitoring and preparing progress reports. The Hazard Mitigation Coordinator will note progress made on the mitigation action items listed in Table 7-2 in annual progress reports and record such progress in Appendix C. To this end, the Hazard Mitigation Coordinator may convene a meeting of the appropriate City Departments to discuss and determine progress, and to identify obstacles to progress, if any.
In addition to the scheduled reports, the Hazard Mitigation Coordinator will convene meetings after damage-causing natural hazard events to review the effects of such events. Based on those effects, adjustments to the mitigation priorities listed in Table 7-2 may be made or additional event-specific actions identified. Such revisions shall be documented as outlined in Section 9.4.
Revisions that warrant changing the text of this Plan or incorporating new information may be prompted by a number of circumstances, including identification of specific new mitigation projects, completion of several mitigation actions, or requirements for qualifying for specific funding. Minor revisions may be handled by addenda.
Major comprehensive review of and revisions to this Hazard Mitigation Plan will be considered on a five-year cycle. Adopted in 2003, the Plan will enter its next review cycle sometime in 2007, with adoption of revisions anticipated in 2008. The Mitigation Planning Committee will be convened to conduct the comprehensive evaluation and revision.
Pearland will involve the public in the plan maintenance process and during the major comprehensive review to the Plan in the same ways used during the original plan development. The public will be notified when the revision process is started and provided the opportunity to review and comment on changes to the plan and priority action items. It is expected that a combination of informational public meetings, surveys and questionnaires, draft documents posted on the web site, and public Council meetings will be undertaken.
The City of Pearland Texas has begun a mitigation planning initiative. The Mitigation Planning Committee (Committee) is composed of members from appropriate agencies (list follows).
The Committee convened on November 19, 2002 for the first meeting to review and address the following:
What is mitigation planning and why the City is undertaking this task. It is understood that the Plan will further build on federal and State efforts to reduce the effects of natural hazards; a new federal-level planning requirement was briefly described by FEMA.
The planning process was outlined: identify hazards; identify what is at risk; evaluate current policies and procedures; evaluate what else can be done (or can be done differently).
Overview of common natural hazards: flood (from all sources, including hurricane, heavy rain, dam break), high wind, winter storms
Less common natural hazards: wild fires, earthquake (The City of Pearland has low seismic risk).
Hazardous materials considered where location intersects with natural hazard (i.e., within flood hazard area).
Overview of disasters in the United States: occur in every state; nearly all jurisdictions have flood hazards; winter storms affect more people than floods; earthquakes are the most costly.
Uncounted costs of disasters: small events do not qualify for federal financial assistance; grants do not cover all costs; loan repayment costs far exceed insurance costs.
Define hazard identification & risk assessment: where do hazards occur, with what severity and frequency, and what is likely to be damaged.
Introduction of need for a mitigation goal; to be compatible with other City goals
Overview and examples of mitigation actions:
Programmatic and planning
Public infrastructure and buildings
Review steps in the mitigation planning process:
Field visit to damage/vulnerable locations
Interview each department
Prioritize mitigation actions
Get public input (process is still to be determined)
Prepare, review and adopt plan
Target is to complete the plan by July 31, 2003. This will require three to four more committee meetings. The next meeting will be preceded by in-depth interviews with representatives from each department and pertinent program.
Second meeting of the Committee – Mid-January. All committee members will be given appropriate advance notice of the meeting time and place once it is finalized.
The following table lists the members of the Committee. They will participate in Committee meetings, gather and provide information to the consultant, review interim materials and drafts of the Plan, and evaluate potential mitigation actions in the context of their department’s capabilities and responsibilities as well as the overall and long-term benefits of the City.
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It is hard to believe that a book about the Gross Domestic Product could be interesting, important and occasionally amusing, but Diane Coyle has succeeded in all of this with GDP: A Brief but Affectionate History. It has two very salient takeaways for politics, one practical and one philosophical. First, GDP has become less and less good at capturing positive changes in human welfare. As a result, the lower growth in GDP in the last few decades is less troubling than it is often made out to be. Second, GDP is a measurement of the government that has inherent biases that one might expect from a metric devised by the government. Classical liberals should thus be careful to separate their respect for market freedom from any worship at the altar of GDP.
Coyle shows that GDP was designed for a time when most of the economy consisted of the production of materials, not intellectual property or services. Indeed, because it was formulated at the time that government came to seen as responsible for the economy, its underlying image is that of a machine. Put so much capital and labor into the economy and get out such much output of goods.
But of course today much of the economy does not lie in the production of material goods. And that means changes in GDP do not reflect all of our economic growth. Take services for instance. We could measure output by simply by seeing how many patients a doctor saw or even what his salary is, but that would not tell us much about the increase in welfare he provided to his patients. And in fact, medical advances have been huge, both in extending life and improving its quality. This fact underscores an essential truth revealed by Coyle: GDP cannot function as a measure of human welfare. And the disconnect between material production and what the economy actually delivers makes it ever less so.
As Coyle notes, GDP also has trouble capturing innovation. Each year’s output has to be compared to last year’s to gauge growth and that requires measuring a standard basket of goods from year to year. But as technology accelerates, the comparison is harder and harder to make, because there are so many new things in the basket. Smartphones replace phones, for instance, and the internet becomes an ever greater source of services. These innovations are related to yet another difficulty: nonmonetary activities, like surfing the internet, become more salient to the economy and yet are harder to price.
Another problem with using GDP to gauge growth is that it does not catch the ever greater variety of goods within a category. Coyle shows that of late variety has been increasing enormously in everything from cereals to fashion styles. Greater choice contributes substantially to well-being. Interestingly, the difficulty GDP has in measuring increased innovation and choice may also bear on debates on inequality. Customization is far more available today than it was in decades past when it was the purview of the rich. Innovations create more and more free things. While, according to GDP, the music industry has shrunk, that is because more free good stuff is widely available. These phenomena help the many, not the one percent.
This last point underscores why classical liberals should be careful not to be imprisoned by particular metrics of statistics (a word itself that is cognate with state). To be sure, GDP growth may provide a rough and ready proxy for economic success from one year to the next, but over time it is no substitute for thinking more imaginatively about economic health, particularly given the huge benefits of medical and digital innovation (which will soon be intertwined). And while the United States economy has been growing faster than continental Europe for decades according to GDP per capita, the more persuasive evidence of its comparative beneficence is that more Europeans want to come here rather than the other way around. No metric can replace the evidence of choices made possible by freedom.
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Enlightenment Economics and the Framing of the U.S. Constitution
11 Pages Posted: 19 Feb 2013
Date Written: 2012
Some scholars have argued that the Framers of the U.S. Constitution did not have a common set of views on economics, or that the Constitution, except perhaps in isolated clauses, does not reflect any specific economic views. The principal Framers did, in fact, share a basic set of economic views, though of course they did not agree on all economic questions. Their shared economic views were common to enlightenment thinkers: promoting free trade, curtailing rent-seeking (the transfer of wealth from producers to non-producers through political power), and, in most instances, eliminating monopolies.
These economic views permeate the Constitution and are not manifest only in odd clauses. The Framers designed many features of the Constitution to further these economic ends. I discuss four of them here: (1) the Commerce Clause; (2) the interstate and alien diversity clauses; (3) the elaborate procedures of bicameralism and presentment for enacting bills (and the provision allowing the Senate to amend financial bills); and (4) the enumerated constitutional limitations on legislative power.
Keywords: enlightenment economics, commerce clause, diversity clause, legislative process, bicameralism, presentment, enumerated powers, free trade, rent seeking, monopolies, James Madison, framing of the U.S. Constitution
JEL Classification: B10, B12, B15, B30, B31, D72, D70, D60, D78, F11, F10, H10, H11, K00, K10, N40, N41, P00, P10
Suggested Citation: Suggested Citation
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Different Methods of Demand Forecasting
Predicting demand for a particular product or service is critical for any business. Such predictions form the basis of capacity planning, inventory management and budgeting. As with most analysis, there is no single best tool for predicting demand. Prudent managers utilize a variety of methods and combine different predictions to make an educated guess.
The simplest and most common method businesses use to predict demand is to ask experts. While such experts can be internal, they can also be outsiders. Internal experts can be sales representatives, the marketing department or, in large corporations, a dedicated planning department. Outside experts can be consulting companies that specialize in demand analysis, economists or industry groups. In sectors such as agriculture and heavy industry, the government also provides predictions to help businesses plan and prepare. Naturally, it is best to collect data from a range of experts, as opposed to relying a single institution or individual
Asking actual buyers of the product how much they are planning to purchase can be an excellent method to predict demand. Especially if the product or service is generally utilized by professional institutions with long-term plans, you should definitely interact with them. A contractor will have a very good idea about how much cement he will need over the next year. Similarly, an auto manufacturer will have detailed sales forecasts for auto sales, which are tremendously useful for steel makers that supply the automaker. The method is less useful for simple everyday items, such as soap and cereal, because consumers don't have a long-term plan for purchasing these items.
If a business has been in operation for an extended period of time, it can usually rely on past data to predict future demand. A supermarket that has been around for a decade will have a good idea about the expected increase in demand for baking supplies during Thanksgiving week, for example. A beverage wholesaler will know how much beer and soda sales go up prior to important football games. Such predictions naturally require high-quality data. To enhance the quality of predictions, you should record not only the quantity sold, but also key event dates and descriptions.
Advanced Statistical Tools
Businesses that can invest the time and effort in more-advanced statistical methods can utilize a wide variety of inputs. In particular, regression analysis can help predict demand based on multiple factors and can be highly useful. A regression model for estimating ice cream sales might use as input the weather temperature, prices of competing products such as cookies and chips, and advertising spending by manufacturers. While the number of inputs that can be fed into a regression model is, in theory, infinite, excessively complex methods do not necessarily produce better results. It is usually best to limit the inputs to variables that are known to exert significant influence on demand.
Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.
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The devastation wrought by Hurricane Sandy reminds us once again of the destructive potential of extreme weather—even in a developed country such as the United States, and even with ample warning and swift emergency response. From Kingston, Jamaica to Jamaica, Queens, this “perfect storm” exacted a deadly toll that New York’s mayor reckoned was even higher as a result of climate change.
But while developed countries dig ever deeper to fund elaborate flood defense systems, compensate farmers, and adjust thermostats to accommodate hotter summers, the consequences of climate change in Africa can be catastrophic: Crops fail. People go hungry. Girls spend less time in school and more time collecting increasingly scarce water for their families.
With little ability to plan for disasters or adjust to shifting weather patterns, poor people and poor countries bear the brunt of more frequent droughts, intense storms, and floods—dramatically undercutting hard-won gains in human development and productivity.
Without more coordinated global action to tackle climate change, now, addressing global poverty—and all its associated risks—will become exponentially more difficult, and costs associated with adapting to and mitigating climate change will rise sharply.
Significant finance already exists for climate change adaptation and mitigation. Applied to smart strategies, we could, as a global community, make the transition to green and inclusive economies that tackle inequality, advance development, and stop the ongoing assault on our ecosystem.
This begs the question: Why isn’t the world doing more to head off the heavy and multidimensional costs of climate change?
Short political cycles discourage long-term thinking, particularly where up-front costs may be high. This is especially true in times of fiscal constraint and sluggish growth. That’s one reason.
Little appreciation exists, further, of how climate change undermines gains in the developing world, hitting hardest precisely those people who have contributed least to the environmental damage that now threatens their lives, their livelihoods and their countries’ prospects.
At the global level, policy responses lag well behind where science tells us they should be.
For the world to stay under the two degree Celsius increase in temperature now viewed as a threshold beyond which catastrophic and irreversible climate change will occur, we must all act decisively to stabilize and then radically reduce our carbon emissions.
We must find agreement on who needs to do what and when, as well as on mechanisms needed to transition to a green and inclusive economy. All countries must adopt clean technologies, boost energy efficiency, and switch to more sustainable sources of energy and modes of production and consumption.
The payoff from doing this could be significant.
Tackling climate change can help accelerate economic and energy transformations, drive revolutions in technology, and spur new production models. It can mobilize the creation of new goods, services, jobs, and exports. It can open up new opportunities for developing and developed countries alike.
This requires engaged citizens and bold, far-sighted leaders, willing and able to take on entrenched interests and leave failed models behind. The issues and politics are challenging.
Just as fixing health problems requires not just better hospitals, but also adequate education, nutrition, and a clean and peaceful environment, tackling climate change requires us to focus on how we develop our economies and societies. A greater understanding of the links among these challenges must be brought into our national and global discourse.
Climate change cannot be dismissed as of concern only to scientists and environmentalists. It must be brought into debates on how to stimulate economic growth, address deficits, generate decent work, achieve energy security, and lay the ground for a more stable and peaceful world.
The next round of climate negotiations in Doha, at the end of this month, must focus on implementation of agreements already reached and action to resolve outstanding issues. Current efforts are not delivering at the speed or scale required. “Too little, too late” is not the legacy we should leave to future generations.
Recent estimates suggest our carbon-intensive economies cost the world around $1.2 trillion yearly, or 1.6 percent of total global GDP. They warn that with the current level of greenhouse gas emissions and carbon pollution, those costs could double by 2030. The costs of inaction must be made as visible as the costs of urgent action to reverse this course. The cost curve has already risen steeply.
At Doha, UN member states must build on what has already been agreed to create a sufficiently ambitious, fair, and legally binding climate change response.
Even before Hurricane Sandy, Americans recognized climate change as a factor in their own changing weather patterns—74 percent, according to a Yale University survey in September, up five percentage points since March. Asked about six recent extreme US weather events, including record high summer temperatures and the Midwest drought, majorities said global warming had made them worse. One in five cited harm to their health, property or finances from an extreme heat wave in the past year.
All countries, including the United States, can act to head off the worst impacts of climate change, while generating new industries, jobs and more sustainable ways of living. The need is urgent. There is no time to waste.
Helen Clark is the Administrator of the United Nations Development Programme and former Prime Minister of New Zealand. This op-ed first appeared on AlertNet and is based on a lecture Ms. Clark gave at Stanford University on Nov. 8.
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It's hard to enter a technical conference these days without at least one party bringing up the advancements of blockchain. With support from big-name players including IBM, J.P. Morgan Chase and Microsoft, and the foundation behind the advancement of cryptocurrencies such as Bitcoin, researchers now argue blockchain may be the ultimate disruptive technology. Certainly if advances in development continue, the technology is set to become a major game changer, shaking up the finance industry and potentially many others.
If blockchain is to succeed however, privacy professionals need to start getting involved with the technology's development. It is crucial that we to understand what we're dealing with, the technology's strengths and weaknesses, that we may be able to properly advise both when blockchain technology should/shouldn't be adapted, and get involved in the development of possible solutions so that the technology can be adapted without unintended potential harm. For blockchain to go forward and be used in projects that collect personally identifiable information, the community needs to understand the implications against personal privacy, and challenges their product will need to address to properly respect personal information rights.
What is Blockchain?
Understanding blockchain is critical before considering implementing the technology into an existing or new practice. While blockchain offers a bevy of opportunities, it is fundamentally different than other data storage technologies seen in traditional computing. blockchain is not a type of software, a program or a scalable database: it is a new way of verifying, saving, sharing and storing information.
One way to look at blockchain is to think of a governance model far more familiar: autarchies vs democracies. Both are ways societies come to lead the population, distribute power and information, and (ideally) keep things running smoothly. Up until now, traditional data models have operated under the autarchy model: while information is stored, accessed and shared through various ports, in order for updates to sync and changes to be authenticated, all data has had to move through a primary database as the overseer. Even cloud systems and shared documents, which seemingly allow access and editing capability through multiple devices and accounts, eventually sync into one single program that overseas the execution of code, performs checks, balances and assigns attributes against information coming and going.
Now consider blockchain: instead of that single database rule who authenticates updates before passing them forward, when information is added or modified it moves to a group of digital overseers, called nodes. The nodes together verify the information, run checks including checks against other 'blocks' of connected information and, upon consensus, distribute the updated information to all others on the network. The nodes complete their task by giving information an official seal: a time stamp that indicates changes from the last update and that yes, the update is approved, and a connector (the hash) that links their approved updates to prior approved updates, developing the 'chain'. As there is more than one node, the information has much stricter requirements for verification. If an evil advisor (such as an outside hacker) wishes to overthrow the system, they've got to get past or control not a single leader, but a group of experts: if something is off, the changes won't go through and the outside party's plans for takeover are thwarted.
While blockchain was originally devised as a theory only, thanks to increases in computing power and ability, practical examples and uses are coming into effect. The most popular example of blockchain technology is with money: 'bitcoins', or digital currency are gaining interest and becoming more popular as they offer advantages over traditional money management systems, with some experts expecting them to completely uproot the financial industry. Bitcoins however, are but one popular example: other potential applications for blockchain are considerable.
Consider, as a colleague once described, the possibilities with food supplies, such as beef. Those in the meat processing industry know it is rife with problems, contamination of original product and logistic fraud among them. Blockchain offers solutions: what if, should contaminated meat be discovered, production managers could trace the source of infected beef down to the very cow, with the ability to test the rest of the herd and determine which other products were safe? What if, upon discovery of a contaminated cow, producers could do the reverse and determine exactly what products the contaminated animal had been used in, down to the shelved item or product sold? Another example would be reduction of product fraud: suppose someone raised cattle in India, then, when shipped to a buyer in Italy switched the bill of sale to claim the beef had originated in Argentina. Argentinian cattle fetches a higher price than Indian, and it would be exceedingly difficult for the importer to recognize scamming, particularly from the product alone, resulting in higher payment for a lower grade product. With blockchain however, if that cow had an accompanying digital marker that could not be modified, it would be possible to trace origins down to the cow, and have more trust in purchasing product.
Privacy and Blockchain
So where does privacy fit into blockchain development? As described above, the technology offers potential breakthroughs in how it can be used, but it is important to understand that because it operates differently than traditional computing models, it has different strengths and weakness in how it handles information. Unfortunately, this means things do get complicated when adding personally identifiable information and privacy legislations into the mix.
Blockchain Strengths for Privacy
On one hand, blockchain unquestionably offers security benefits that are a boon to keeping data private. While it is mistaken to believe all data within a blockchain is encrypted, encryption of data can be defaulted easier within blockchain, including the ability of blocks of data to be hashed. While traditional cypher models need to decrypt the data into plaintext at some point in the process to perform operations, this is not so with blockchain hashes: data can be processed without use of a key. Getting access to encrypted information on a blockchain becomes even more complex when you factor in that the data itself is by default split up: even if one block is decrypted, in order to read a full record the hacker will need to decrypt all other blocks connecting the chain, which use different algorithms in their security. Picture a fantasy film or game where the protagonist must go through multiple challenges to acquire different pieces of a torn scroll: you cannot read the data without all pieces, and gaining access to all the pieces is no easy feat. blockchain isn't impervious to attacks, but it is certainly much stronger against the cyber onslaughts that have recently devastated industry leaders.
Blockchain data also benefits from much stronger verification controls than traditional models, which limits the ability of unauthorized parties to alter data. Under the Canadian PIPEDA, for example, one of the privacy standards is maintaining accuracy of records. In order for updates or changes to be accepted, data entered into a blockchain goes through a rigorous screening process. As a result, there is a higher quality of data contained that is complete, consistent and accurate. The potential for using blockchain to authenticate identity is particularly high: instead of relying on passwords or providing gatekeepers with identifiable information that can be stolen, identity is proven by assigning a code that is significantly difficult to copy or fabricate.
Blockchain Privacy Weaknesses
While blockchain is stronger at providing encryption safeguards and verification, it is weak in areas considered critical for privacy: most notably access control and the destruction of data. First, blockchain lacks the flexibility of other systems when it comes to allowing or removing access to information. For a blockchain app, access is all or nothing: either access is via public blockchain, and can be seen by anyone in the community creating a project, or a private blockchain where permissions are given to a select group of individuals. The private blockchain might appear ideal, save that permissions cannot be added and subtracted, or limited in the information they may have access to. As a prime example of conflict, most privacy laws require an organization to grant access of information to individual users. Under current models of blockchain this is not possible: if a user is granted access to their information, they are granted access to all information within the blockchain; not only a small segment for only a small portion of time. Other incompatibilities include Article 20 of the GDPR, which requires the portability of data, and Article 25, where new technology cannot be implemented without privacy controls built-in; effectively preventing existing blockchain technologies from being usable on the European market unless they do not collect personally identifiable information or meet user access and controller requirements from the get-go.
The other big problem with blockchain and privacy is that there is no way to destroy information, or for users who interact with the data to remain anonymous: once data enters the chain, it's there forever. The inability to destroy information again, flies right in the face of privacy legislations, including state laws in the U.S., which require businesses to erase certain levels of personally identifiable data after the intended use. Proper destruction data, particularly when the data is no longer needed for it's original purpose, provides a safeguard against its unauthorized use for different objectives in the future.
Blockchain's privacy problem is a known concern. In the case of cryptocurrency, banks are already working to overcome one major challenge: at present all transactions are recorded on a public ledger. The owner who spends the bitcoin might be anonymous at the time of transaction, but their purchases certainly aren't: all it could take is a little lining up between bitcoin and online wallet, or an analysis of spending history, to ID the purchaser. Likewise, consider the above example of a blockchain that tracks meat, right down to when the final cut was sold. Suppose at the end of the processing, a transaction was recorded per animal on who made the purchase. Now suppose the person who purchased the meat was heavily involved with a community highly against animal consumption, and, after the purchase history was accessed by members of the community, resulted in discipline. This might seem a bit much, until you discover studies have proven that when individuals operate outside expected dietary norms, it can be uncomfortable.
Finally, it is important to recognize that while blockchain is stronger than traditional models, there is an error in assuming all blockchains are safe: while harder to get at than traditional models, blockchains can be attacked, most notably through a heavy-handed DDoS, such as one that uses unprotected Internet of Things devices as a launching pad. Blockchain after all, while more secure, is created by humans, and is as prone to bugs and loopholes as any other platform, which hackers can find and exploit, and if adapted into more organizations will increasingly be used by humans without advanced technology backgrounds, which hackers love to exploit. A more famous ‘hack’ of blockchain involves bitcoin alternative Ethereum, another blockchain-based cryptocurrency, where attackers used a vulnerability in an Ethereum project code to steal 3.6 million units of cryptocurrency, worth $64 million dollars. The attack was handled, but not in a way that would work with real-world data or transactions: try, just try to explain the necessity of a parallel universe to a law firm.
For privacy professionals and blockchain enthusiasts, we need to start looking if there are ways blockchain can evolve and be adapted to fit current privacy frameworks. Likewise, we shouldn't be afraid to turn the problem around on its head: are there ways blockchain could increase privacy, individual ownership of personal data, and the right to be left alone? Although at present using blockchain to store sensitive, personally identifiable information is not feasible, future solutions must be ironed out. There’s no ‘if’ for blockchain: to many large players are involved, and the technology has too many advantages to be ignored, and thanks to recent high-profile hacks many will be looking towards the technology if it can offer greater defence for safeguarding sensitive information assets. It's up to both the privacy and blockchain community then, to come together to discover solutions that work.
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The Natural Capital Roadmap presents the ideas of over 300 leaders in farming, forestry, natural resource management, conservation, finance, policy, research and government on how to progress the natural capital agenda in Australia.
Australian farmers contribute not only healthy food for our population, but also a valuable export market worth $44.3 billion. Land managers and food producers are facing pressure from a global population increase and a change in the way we eat. Meat consumption within Australia increases by less than half a per cent annually, but as an exporter to developing and emerging economies, we feel the pressure of a three per cent annual increase from these countries. Despite increasing demand, competing demands could reduce the amount of land available for food production. At the same time, climate change is beginning to have implications on the ground, with an increase in unpredictable weather patterns and competition for water.
Our natural resources are an asset. They enable us to feed our population, run successful export and timber industries, develop bioenergy options and provide space for both urban and industrial development. However, the systems in place for measuring and valuing this asset are immature. The concept of ‘natural capital’ positions our environment alongside other forms of economic management, such as finance. It envisions the creation of systems to assign a value to our natural resources, informing decisions for industry, investors and government. This approach would provide a more consistent approach to measuring natural capital at all scales, and a better picture of how our environment contributes to economic and human activity.
In a practical example of how natural capital measurement can enable shifts in attitudes and practices, research from ANU used natural capital accounting to demonstrate that farmers can maintain profits whilst maintaining and enhancing both biodiversity and natural capital. Interestingly, the study also found mental health benefits associated with improved natural capital on farms.
It is important to note that measurement and valuation of natural capital is one ‘necessary but insufficient’ enabler of the systemic changes needed in food and land use, and should not slow the implementation of other enablers including capacity building, development of incentives and investment, research and innovation and long-term policy and industry planning. In October 2019 ClimateWorks published the Natural Capital Roadmap, presenting the ideas of over 300 leaders in farming, forestry, natural resource management, conservation, finance, policy, research and government on how to progress the natural capital agenda in Australia.
The Roadmap is intended to support the acceleration, expansion, alignment, coordination, resourcing and implementation of organisations working on natural capital, and of existing and emerging natural capital initiatives.
ClimateWorks Australia will seek to track implementation progress and build momentum for projects aligned with the Roadmap.
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What is the Straight Line Depreciation Method?
The straight line depreciation method is used to calculate the annual depreciation expense of a fixed asset.
The straight line method is the simplest and most generally used method of calculating depreciation, and is given by the straight line method formula as follows:
Cost = Original cost of the fixed asset
Salvage (Residual) value = Estimated value of the fixed asset at the end of its useful life.
Useful life = Estimated life of the fixed asset in years.
The amount of the asset depreciated over its useful life is referred to as the depreciable cost and is equal to the cost less the salvage value of the asset.
Straight Line Method Example
If for example, a business has purchased equipment with a value of 10,000 and expects it to have a useful life of 3 years and an estimated salvage value of 1,000, then the straight line method calculation using the formula above would be as follows:
Depreciation = (Cost - Salvage Value) / Useful Life Depreciation = (10,000 - 1,000) / 3 years = 3,000 a year
The diagram below demonstrates how the asset is written down to its salvage value.
At the end of the 3 years the total depreciation expense in the income statement would be 9,000 (3 x 3,000), and the book value of the equipment would be 10,000 – 9,000 = 1,000, which is the salvage value.
Zero Salvage Value
If the salvage value is unknown or is likely to be a minimal amount, it is normal to assume it is zero, in which case the straight line depreciation formula is given by
Using the same information from the example above, the straight line method of depreciation would give depreciation of 10,000 / 3 = 3,333 per year, and after 3 years the equipment would have been written down to a book value of nil.
In this case, at the end of the 3 years the total depreciation expense in the income statement would be 10,000 (3 x 3,333), and the book value of the equipment would be 10,000 – 10,000 = Zero, which again is the expected salvage value.
Straight Line Depreciation Rate
Instead of dividing by the number of years in the depreciation calculation, the term (1 / Useful life) used in the formula above, can be converted to a depreciation rate.
The straight line depreciation rate is given by the following formula.
So using the example above, the cost was 10,000, salvage value 1,000 and useful life 3 years. The straight line rate is calculated as follows.
Depreciation rate = 1 / Useful life Depreciation rate = 1 / 3 = 33.33%
The depreciation expense is then given as (10,000 – 1,000) x 33.33% = 3,000 as before
Depreciation Calculation Methods
Straight line depreciation can be calculated using our straight-line method calculator, by using the straight-line depreciation tables (the answer is given by looking at the column for 3 years and the row for 10,000, the monthly amount shown is 278 per month), or alternatively using the Excel SLN function.
Under the straight line method, the depreciation is the same amount each year. If these amounts were plotted on a graph each year, the points would form a straight line, hence the name straight line depreciation. The method is alternatively referred to as the equal installment method, fixed installment method or original cost method of depreciation.
It is important to understand that although the depreciation expense affects the net income and therefore the equity of a business, it does not involve the movement of cash. No actual cash is put aside, the accumulated depreciation account simply reflects that funds will be needed in the future to replace the fixed assets which are reducing in value due to wear and tear.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.
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Heat is likely the single most missed opportunity for entrepreneurs, investors and the global climate alike.
Heat production uses almost half the world’s energy consumption. 2.5x as much energy is used for heat than for power, i.e. electricity. Though electricity-producing solar cells and wind turbines only cover a few percentages of global energy consumption most initiatives and discussions about energy and climate focus on these two solutions.
When looking at heat production it's worth noting that the remaining part of our electricity consumption is produced by fossil-fired, heat-driven turbines.
All energy may one day be supplied by solar, wind and hydro, but due to the unreliable nature of solar and wind and the limited availability of hydropower, this will require a lot of storage. Using batteries for large-scale, long-duration storage is not a financially sustainable solution. An analysis from EIA (US Energy Information Administration) finds long-duration storage systems to be up to 4 times more expensive per kW than short-duration systems, where short duration is defined as less than half an hour and long duration is more than a couple of hours.
In other words, though the cost of batteries has come a long way down there’s still a very long way to go if batteries are to become cost-competitive to fossil fuels when looking at storage for months, week, or even just days. Heat, on the other hand, can already now be stored in large scale for months at low costs. This will be the theme of the Save For Rainy Days article later in this series.
EIA forecasts renewables – including renewable fuels such as biodiesel and biogas – to account for only 23% of our energy use by 2040. As global energy consumption continues to increase, so will the use of fossil fuels despite the increase in renewables.
Discussions about how to increase renewables' share of the global energy market rarely focus on the energy supplied to and consumed by the heat-driven processes that require half the world's energy. In an attempt to get heat higher on the agenda, this series focuses on how and why renewables' proportion of the total energy market may increase significantly above EIA's projections.
For many people, energy is primarily something that comes out of wall plugs and gasoline pumps which is why they probably don't give heat much thought. And sustainable energy production is something that comes from wind turbines and solar cells. With this being an almost generic mindset it is understandable why the vast majority of politicians and companies focus on solar cells and wind turbines when looking for sustainable energy solutions.
Still, it's remarkable that only a few entrepreneurs, companies and investors seem to be developing and funding solutions addressing heat's 50% footprint of the total energy demand. Maybe nobody talks and thinks about it because nobody talks and thinks about it? Or maybe discussions that actually do take place are too focused on technical experts using technical lingo and focusing technical stuff, and thus discouraging journalists and investors from spending time and resources on the subject.?
I hope the upcoming articles focusing on costs, drivers, solutions, opportunities, challenges, and climate can help inspire a broader discussion and accelerate initiatives and ideas that may profit from building new heat-centered businesses.
Interested in reading more? Please see the links to my other articles below. Additionally, a 'Like’ from you will also be much appreciated as this should help direct more attention at the many business and climate opportunities the market for heat production offers.
Thank you for reading,
Renewables: Global Status Report, REN21 2018
Lazard’s Levelized Cost of Storage Analysis 3.0, Lazard 2017
Electricity Storage and Renewables to 2030, IRENA 2017
Renewables by 2040, EIA 2017
US Battery Storage Market Trends, EIA 2018
I have spent the better part of 20 years investing in cleantech startups. During my career I have probably seen at least 3,000 business proposals, including Heliac's which I was introduced to in 2016 when I headed Climate-KIC Nordic's accelerator program. I found—and still find—Heliac's solution to be by far the best new solution I've ever come around, which is why I joined the company in early 2017.
Disclaimer: I have not double-checked all my sources and I am not an expert in all areas mentioned in the articles. I may therefore have reached conclusions that wiser men and women may know to be inaccurate. If so, I trust they will let me know, so I can become a bit wiser too.
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What is a Fund Flow Statement?
A fund flow statement reveals the periodic increase or decrease of funds of a business enterprise. This statement is able to reveal the efficiency of the staff of financial management in generating funds from various sources and applying them efficiently for generating income without sacrificing the financial health of the business enterprise.
What is meant by fund flow?
The flow of funds refers to transfer of economic value from one asset to another, from one equity to another, from one asset to equity or from one equity to other assets or a combination of any of these. The term ‘flow’ indicates change, and hence, funds flow means change in fund or change in working capital.
The inflows of funds into working capital from the ‘sources of funds’ and include trading profits, issue of shares or/and debentures, borrowings, sale of fixed assets, repayment of borrowings, payment of tax, dividends and increase in working capital. Hence, the difference between the sources and application of funds shows the net change in the working capital during the year/period. It is only those items which affect the net working capital of the business enterprise that find a place in this statement.
Thus, a fund flow statement is a financial statement that reveals the methods by which the business activities have been financed and how the enterprise has used its funds between the opening and closing balance sheet dates. This is only a supplementary statement to ‘time honoured statements’, i.e., income statement and position statement (balance sheet). This statement describes the sources from which additional funds were generated and the areas or items to which these funds are used or applied. In a nutshell, it can be stated that the transactions which increase working capital are sources of funds, whereas the transactions which decrease working capital are the application of funds. From the viewpoint of users of information, this statement helps in understanding how efficiently the funds are procured and how effectively the funds are employed.
In general, the financial statement is Balance Sheet and profit and loss account, popularly known as income statement speak about the net effect of various transactions on the operational and financial position of the company.
Thus, the Balance sheet is a statement of Assets and liabilities of an organization between two periods of time. The Balance sheet assets side shows the development of resources of an undertaking. Whereas the liabilities side indicates its payments to outsiders.
The Profit and loss account shows the income and expenditure of an accounting year, generally a year. Thus, these two statements show the financial highlights of the company. A third statement is prepared o show changes in assets and liabilities from the end of one period of time to the end of another period of time. This statement is known as financial position or fund flow statement.
Fund flow statement is a statement which shows the movement of funds and report of the financial operations of the enterprise. It shows various means by which funds are obtained and where the same are used.
Different definitions of fund flow statement
The following are the definitions of fund flow statement:
1. Rober N. Anthony—The fund flow statement describes the sources from which additional funds were derived and the use to which these sources were put to use.
2. ICWA. It is a statement either prospective or retrospective, setting out the sources and application of the funds of the enterprise. The purpose of the statement is to indicate how funds are raised and how the same have been utilized.
3. Yorston , Smyth and Brown. “A fund flow statement is prepared in summary form to indicate change ( and trends) are prepared regularly. ”
4. Foulke. “A statement of sources and application of funds is a technical device designed to analyze the changes in the financial conditions of a business enterprise between two dates. ”
It is a statement that indicates various means by which the funds have been obtained during a specific period and the ways to which these funds have been used during that period.
Fund flow statement is a statement of cash inflows and cash outflows. There are persons who feel that the funds are cash or working capital which represent the excess of current assets over current liabilities.
The term flow means movement and includes both inflows and outflows of resources. The fund flow and statement means a change in working capital. It is also known as the statement of sources and uses of funds.
Preparation of Fund Flow Statement
To prepare a fund flow statement, we write down the receipts from various assets and liabilities on the source side and the payment for assets and liabilities on the application side. To do this, we need a balance sheet at the beginning and at the end of the accounting period for which a fund flow statement is prepared. The two alternative ways of presenting funds flow statement are given as under.
T-Format of Presenting Funds Flow Statement
Note: Either (A) or (B) will appear in the T form.
The vertical format of Presenting Funds Flow Statement
Note: Either (A) or (B) will appear in the statement.
Objectives and uses of fund flow statement
The main objectives and uses of the fund flow statement are as below.
1. Knowledge of Financial Position. The fund flow statement indicates the addition in profits which is a boon to the shareholders. The division of profit can be planned.
2. Knowledge of addition in share capital. The fund flow statement can highlight the changes in share capital. What is the need of increase in share capital and where the same have been used?
3. Knowledge of Addition or Reduction in Share Premium. The fund flow statement clearly shows the fluctuation in share premium. It is increased when shares are issued at premium when preferential shares or debentures are reduced, the premium it will reduce both position can be seen from this statement.
4. Knowledge of profit or loss of operation. The fund flow statement can easily show whether the organization is earning profit or going into loss.
5. Knowledge of addition in long term Borrowings. This statement can show the additional amount borrowed by issuing debentures. Why is the issue of debentures desirable?
6. Knowledge of decrease in working capital. This statement shows the reduction in working capital. It will be when current assets are less than current liabilities. It speaks about more revenues to the organization.
7. Fund flow statement acts as a guide. It also works as guide to the management. The management can know various future problems of the company. The future needs of the company can be predicted. The management can manage to raise funds effectively and can avoid financial problems of the organization.
8. Helpful in sound dividend policy. There are cases where a company having sufficient profit yet it is advisable not to distribute dividend for lack of cash or liquid. The statement of fund is useful in forming sound dividend policy.
9. Helpful in long term borrowings. The various financial institutions before advancing long term loans ask for many years fund flow statement to know the worthiness of credit of the firm.
10. Useful information to the investors. Before investing funds some investors like to study its fund flow statement to know how the funds are raised, and how these are applied. Whether funds are adequate or not for the payment of interest and principal sum.
11. Other uses of fund now statement.
(i) It highlights whether or not sufficient funds are available for shareholders’ dividends.
(ii) The ability of the organization to thrust the organization for getting additional working capital.
(iii) Justification for long term borrowings.
(iv) Knowledge of sources of funds for the purchase of fixed assets.
Limitations of fund flow statement
The main limitations against fund flow statement are as under:
1. Fund flow statement is not a substitute for income statement or Balance Sheet. The only limiting factor about the fund flow statement is that it is not a substitute for income statement and Balance sheet. It provides some other additional information regarding changes in working capital.
2. It cannot state the reason why capital is raised or redeemed?
3. It is a by-product of financial statement. As a matter of fact, It is a re-arranged statement of financial data.
4. Based on historical data. Fund flow statement is historical in nature as it is the outcome of old financial data which are simply a window dressing.
5. Misleading. FFS is, sometimes misleading if an analyst does not know the reality and soundness of the figures from which they are computed.
Distinction between Balance Sheet and Fund Flow Satatement
|S.No.||Balance Sheet||Funds Flow Statement|
|1||It shows assets and liabilities of an enterprise at the end of the accounting period||It shows the changes in amount of assets and the liabilities of an enterprise during an accounting period.|
|2||It is prepared on a particular date at the end of the accounting period.||It is prepared for a particular accounting period.|
|3||It is prepared with the help of trial balance and additional information provided.||It is prepared to with the help of balance sheets of two years and additional information.|
|4||The purpose of balance sheet is to reveal financial position of a business on a particular date.||It is prepared to make a decision on investing activities.|
|5||It is static in nature as it shows assets and liabilities position on a particular date.||It is dynamic in nature as it reveals the change in the amount of assets and liabilities and the reasons for the same.|
|6||There is a statutory obligation to the business enterprises to prepare balance sheet.||Preparation of fund flow statement is optional. It facilitates decision making.|
|7||Profit and loss account is prepared before the preparation of a balance sheet.||Schedule of changes of working capital is prepared before preparing the fund flow statement.|
|8||It is not much use fo making decisions.||It is a tool used by management for making financial analysis and decisions.|
Distinction between schedule of changes in working capital and fund flow statement
|S.No.||Schedule of Changes in Working Capital||Funds Flow Statement|
|1||It is prepared with current assets and current liabilities only.||It is prepared with both current and non-current assets and liabilities.|
|2||It is prepared as a part of funds flow statement.||It is prepared not as a part of statement of changes in working capital.|
|3||It depicts changes in current assets and current liabilities individually.||It depicts the sources and application of funds of an enterprise as a whole.|
|4||It is prepared with the help of balance sheets of two consecutive accounting periods.||It is prepared with profit and loss account and balance sheet of an enterprise for two consecutive accounting periods.|
|5||It is prepared to know the movement of working capital.||It is prepared to know the overall operational efficiency of an enterprise.|
From the following balance sheets of Kites Ltd. prepare Statement of Changes in Working Capital and Fund Flow Statement.
Statement of Changes in Working Capital
Note: Net decrease in the working capital is entered in the increase column to balance the statement.
Fund Flow Statement
Statement Showing Sources and Application of Funds
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– Lane Simond:
It seems as if every day we watch, read, or hear about another disaster or tragedy occurring. Of course, the worldwide COVID-19 pandemic that hit us all in 2020 and continues to rage has been the biggest news story lately, so when I came across hopeful information, I thought it would be nice to share it.
In a new paper published in the journal Climate Policy, the Director of the Global Systems Institute at the University of Exeter, Tim Lenton explains that we could be at what he calls a “tipping point” that triggers rapid change, even the type of change that helps improve our environment. A tipping point occurs when a small change leads to an even bigger response.
Lenton suggests that small groups or countries could trigger a tipping point and thus accelerate progress in terms of curbing climate change. He points out that the power sector must decarbonize four times faster than its current rate and while this sounds like a tall order, a tipping point could help in bringing it to reality.
In the paper, the example of light road transport is used. In Norway, sales of new electric vehicles (EV’s) account for 50 percent of car sales. Other European countries also have impressive EV sales numbers. In New Zealand electric car sales have tripled in recent years. Part of the reason for this happening is the sales price. In Norway they have policies in place that make EVs the same price as traditional vehicles. Lenton and his colleagues say if just a few more countries around the world adopt such policies, it will cause a global tipping point.
While light road transport is just one example, it provides hope for those of us who want to see a cleaner world. The authors of the paper, “Upward-scaling tipping cascades to meet climate goals: plausible grounds for hope,” does indicate that tipping points like the example described above, are not guaranteed. However, “reinforcing feedbacks” mean small actions could cause large changes on a worldwide scale.
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Yes, forecasting can be hard. But on the supply side, the good news is that many technologies display constant growth rate over time. This means that capacity is growing exponentially and when plotted on a logarithmic scale, capacity is a linear function of time. Sounds familiar? Yes, this is Moore’s law: the number of transistor per chip has been correctly predicted by to double every 2 years on average since the 1960s, giving an annual growth rate of +40%.
That the IT and consumer electronics industry could maintain growth rate between 30% and 60% over long periods of time is really remarkable, not only because of the great technical performance enhancements involved, but also because of the seemingly insatiable readiness of the market to absorb those capacity increases and build new products around them.
But not all technologies follow Moore’s law, and the exponential growth model might not always be appropriate.
In fact, there is now a better model: it is called the “Step and Wait” model (SAW). A paper by Gareth James and Gerard Tellis, professors at the USC Marshall School of Business and their co-authors Ashish Sood, at Emory and Ji Zhu at the University of Michigan, concludes that Moore’s Law does not apply for most industries, including the PC industry.
The original research article can be downloaded here:
It is a bit indigest, but the following article and explanation from USC Marschall is most readable. Enjoy!
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Substantial food price gaps across West Africa
Prices are a key determinant of access to food in West Africa as households rely on markets for two-thirds of their food supply. Food prices in sub-Saharan Africa are 30 to 40% more expensive than in the rest of the world at comparable levels of GDP per capita. They vary greatly across countries – from -28% in Mauritania to +14% in Ghana compared to the West African average, reflecting also the relative inefficiency of the regional food market. Price differentials are at their lowest between the eight countries of the West African Economic and Monetary Union (UEMOA). In other areas (Côte’divoire-Ghana, Mauritania-Senegal, Liberia-Sierra Leone), border price differentials exceed 17%, highlighting the high transaction costs. Since the launch of the Trade Liberalisation Scheme of the Economic Community of West African States (ETLS/ECOWAS) in the early 90s, ECOWAS aims to promote a free trade area. Customs duties levied on imports and exports, and non-tariff barriers are formally abolished within the ECOWAS area. Yet, in practice, its implementation remains haphazard with many remaining barriers. Removing these obstacles and facilitating regional trade would contribute to reducing food prices.
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The federal government's Expert Panel on Sustainable Finance says Canada has a long way to go to achieve sustainable growth — and in its final report, being released today, it says financial markets will play a fundamental role in unlocking that economic potential. But while Canada has a lot of catching up to do compared to countries in the European Union or Asia, the panel argues that if its 15 recommendations are acted upon, Canada could become a leader in transitioning to a greener economy. "Our environmental and economic aspirations need to become one and the same, because ultimately they are indivisible," said Tiff Macklem, chair of the expert panel and a former senior deputy governor of the Bank of Canada.
"Finance is not going to solve climate change, but the things that are going to solve it ... all require a lot of investment. And that's where finance is critical. "If Canada is to realize its environmental and economic goals, sustainable finance needs to go mainstream. 'Sustainable finance' needs to be simply 'finance'."
Changing consumer patterns
The panel's recommendations encompass what the federal government, the financial sector, regulators and investors need to do to ensure Canada remains competitive in the face of climate change. "As the effects of climate change are becoming more evident around the world, we are also seeing shifts in consumer preferences, innovation, economic activity, competitive advantage and wealth creation," says the report.
"With these shifts, sound environmental stewardship is increasingly intersecting with market access and becoming a critical source of sustained competitive advantage." The report highlights Canada's unique position, having both a deeply resource-based economy and a world-class financial system. For Canada, it says, that means both challenges — as the world transitions away from carbon toward cleaner energy sources — and an opportunity to lead. "This is a real opportunity to bring Canada's financial system into the modern age," said Kevin Quinlan, a Vancouver-based climate change and sustainable finance consultant. "It's not only good for the economic sectors exposed to climate change risk, and the people who work in those sectors, but for all Canadians who invest in the economy." Among other things, the report recommends:
Standards for how companies disclose the risk climate change poses to them and their bottom line
Incentives to boost the clean energy sector
Help for the oil and natural gas sector to make it as low-emissions as possible
Having the federal government publish its plan for lower emissions past 2030, up to 2050, so that industry knows what to expect
Establishing a Canadian Centre for Climate Information and Analytics to obtain better data on the economic and financial impacts of climate change
Accelerating development of a vibrant private building retrofit market.
A 'super-deduction' for green investments
The report also calls for financial incentives for investors to choose mutual funds and equities that are more climate-friendly, such as a 'super deduction' which would give investors income tax deductions for the investment worth more than 100 per cent. "We think this would get Canadians asking their investment advisers about climate-smart investments, it would get investment advisers to ask their clients about their climate preferences and ... it would stimulate the market development for climate-conscious investment products," said Macklem. The panel also supports carbon pricing as a financial instrument to lower greenhouse gas emissions — but it says industry and investors need more certainty, and that means the federal government should map out its carbon pricing plan beyond 2023.
Macklem said there's nothing stopping governments, industry and financial institutions from acting on the recommendations immediately, even with a federal election looming. "This is our best economic and financial advice for any (political) party in Canada," he said. "There's going to be an active discussion, that's a good thing. But we tried to be very thoughtful about what were the priorities for Canada, what are the things that could really make a difference in Canada." Quinlan said this report is important. "The transition away from carbon is already happening around the world," he said. "We need to be proactive and ensure a smooth transition for Canada so that no one is left behind."
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Driverless cars are on course to generate €17 trillion for the European economy by 2050, according to new research.
New independent economic analysis shows that autonomous vehicles will start adding 0.15 percent to Europe’s annual growth rate in the decades to come.
As a result, the European gross domestic product [GDP] will, cumulatively, be over five per cent higher in the year 2050, by which time autonomous vehicles will have contributed a total of €17 trillion to GDP.
Fully ‘autonomous vehicles’ are predicted to be providing fully ‘hands-off’ door-to-door transport on the road within the decade. Nissan Europe polled 6,000 people in UK, France, Germany, Spain, Italy and Norway to discover their attitudes to driverless motors.
Freedom to do things other than driving was voted the biggest benefit – no surprise as four out of five confessed to already ‘multi-tasking’ while at the wheel. Reading books or catching up on news is what most of Europe said they’d do with their extra time in the car, followed by sleeping, doing paperwork and watching TV or films.
The survey also revealed that almost a quarter of those planning to buy a car in five or more years would consider an autonomous car.
Paul Willcox, Chairman of Nissan Europe, said: “This independent report highlights that we are in the midst of a social and economic revolution.
“It shows that autonomous technology will have a fundamental impact not just on the automotive industry but across European economies and societies and it suggests that leadership within all levels of government is needed.
“At Nissan we believe, for the full benefits of autonomous drive technologies to be realised, governments and municipalities across Europe should review the report’s findings, work hand in hand with the automotive industry, and play a vital role in ushering in this new technological era.”
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Tax in today's world
This discussion paper explores how shifting tax from labour to natural resource use, pollution and consumption could help meet the goals of the Paris Climate Agreement, the UN Sustainable Development Goals (SDGs) and an inclusive, circular economy.
An interconnected world
Humanity is facing massive challenges. The most daunting tasks are adapting the metabolism of our economies to match the carrying capacity of the earth and stay below an average two degrees Celsius of global warming.
According to the latest IPCC report, global carbon emissions must start to reduce well within 12 years if we are to prevent large-scale natural and human risks from becoming irreversible reality. Our societies face equally important social challenges, including enabling a growing population to develop to their full potential and find decent work.
The UN Sustainable Development Goals (SDGs) connect the social and ecological challenges that will dominate the global agenda for the upcoming decades.
Governments need to develop coherent strategies to deal with these megatrends. Tax has an important role to play, as tax costs have a fundamental impact on investment, employment and consumption decisions.
Tax systems need to adapt
The foundations of modern tax systems were laid down in the era of the industrial revolution: before globalisation and mass consumption, before the emergence of climate disruption and water supply risks, and before digitisation, automation and robotisation. Considering today's fast-changing world, tax systems will need to adapt.
Just as we now see our planet as an interconnected system, we must take a fresh look at our tax systems as a whole. Specific tax measures, such as a carbon tax, landfill levies or taxes on single-use plastic, may help but they are no longer enough.
In order to craft a tax system that is fit for the 21st century, it is necessary to think more widely about what governments should be taxing, and how the tax revenues should be used.
Focus on labour taxes and green taxes
This discussion paper focuses on two types of tax that are less publicised than corporate income tax but directly related to today's socio-economic challenges:
- labour taxes (which include personal income tax, payroll taxes and social security contributions);and
- environmental (or 'green') taxes.
Currently, public revenue is raised largely on employment taxes. In all OECD countries except Chile, they provided the largest share of tax revenue: more than VAT and taxes on capital. Across the OECD, labour taxes account for 52.1% of total public revenue raised on average, while green taxes account for only 5.3%.
Between 2009 and 2016, the labour tax burden has increased further. On average, of every dollar an employer pays in labour costs, only $0.64 ends up in the pocket of the employee.
There is some variation across continents: African, Latin American and Caribbean countries generally rely more on taxes on goods and services. Still, labour tax revenues provide a significant share of revenues in these regions, and substantially more than green taxes.
Considering the challenges societies are facing today, it is time to rebalance our tax systems.
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Taxation Assignment Help
Everybody has some sort of idea on the concept on taxation. It is the process through which people pay taxes to the government. Income of any government depends mainly on this system, as a result a number of rules and regulations prevail, which domiciles of a country must follow strictly. There are various courses on taxation conducted by the colleges, universities and institutes all over the world. At the end of these courses, students either go for higher education or pursue career as tax consultants. These students also get opportunities to work as employees in finance and accounts departments in various companies. Working as tax professionals is always very exciting as well as challenging for the professionals in that field. But, as a student, one needs to be very focused and studious individual. Taxation assignment given to write on various topics of taxation are the toughest part of the courses. This is when students frequently seek taxation assignment help from professionals writers associated with BookMyEssay.
What are the Different Types of Taxes?
Types of taxes vary from country to country. In most of the countries like USA, Canada, and India, there are Federal taxes imposed by the federal government and local taxes imposed by the state or local government.
There are taxes like Income Tax, Property tax, Sales tax, Gift Tax, Tobacco tax, and so on. Types and rules changes from one country to another, but basic taxes like Income tax, Sales tax or Property Tax are imposed in almost all countries, only the rate and system change.
Again, there are different types of corporate taxes which are imposed on business organizations like partnership firms, companies, showrooms, commercial establishments etc. Foreign companies need to pay some specific taxes apart from the common taxes, while the domestic companies need to follow definite rules when they want to export or import goods and raw materials.
Every responsible citizens and managements of the organizations of a country should have a clear idea about these taxes, and tax consultants play a crucial role in this matter.
What Examiners Want to Judge?
Understanding various types of taxation and multiples of laws related to the subject are not so easy. Taxation is a matter of thorough calculations and understanding the rules and regulations intensively. Most of the assignments given on taxation are designed to judge the students’ hold on the subject and their readiness to face the real world problems. A few other aspects the examiners like to judge through these assignments are as follows –
- Students’ knowledge on the tax laws and how they are applying the laws in different situations.
- How proficient a student is in calculating taxes?
- How skillful is a student in understanding taxable aspects in a business organization.
Changes in rules and regulations are quite normal in this field. Hence, a professional need to be updated always. In case of writing an assignment on Taxation, the examiner also likes to see how updated the student is on various aspects of taxation.
Specialties of Writers Associated with BookMyEssay
Writers, who provide expert guidance in writing taxation assignment, are highly proficient persons in the field of taxation and tax laws. They have a thorough knowledge on the latest happenings in this field in their respective countries. Here are some other specialties of these writers –
- They are always ready to crack any kinds of taxation assignments. Even, the toughest assignments are handled by them quite proficiently.
- They are very strict in following guidelines provided by the examiners.
- They also follow the deadlines without fail.
- They are proficient in using latest tools and software. Hence, assignments completed by them always look very impressive.
- They provide unique assignments to the students. Hence, there remains no chance of plagiarism.
Apart from these specialties of the writers associated with BookMyEssay, students always get opportunities to ask for certain changes or add some new and relevant paragraphs whenever needed.
A taxation assignment requires lots of data, knowledge on the latest laws, knowledge on the latest developments, and analytical mind. Writers here are chosen after much inspection on their track records. That is why, over the years, students rely so much on these writers for Taxation assignment help.
Unique Features of BookMyEssay?
- Customer service cell remains open 24×7. Students can contact the executives with their assignments and problems anytime.
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The writers associated with this organization take all responsibilities as far as taxation assignments are concerned. Thus, after delivering their assignments to BookMyEssay, students can concentrate on their other tasks and classes confidently.
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October 30, 2015 – Today, DuPont celebrated the opening of its cellulosic biofuel facility in Nevada, Iowa. The biorefinery is the world’s largest cellulosic ethanol plant, with the capacity to produce 30 million gallons per year of clean fuel that offers a 90 per cent reduction in greenhouse gas emissions as compared to gasoline.
By Andrew Snook
The raw material used to produce the ethanol is corn stover – the stalks, leaves and cobs left in a field after harvest. The facility will demonstrate at commercial scale that non-food feedstocks from agriculture can be the renewable raw material to power the future energy demands of society. Cellulosic ethanol will further diversify the transportation fuel mix just as wind and solar are expanding the renewable options for power generation.
Vital to the supply chain and the entire operation of the Nevada biorefinery are close to 500 local farmers, who will provide the annual 375,000 dry tons of stover needed to produce this cellulosic ethanol from within a 30-mile radius of the facility. In addition to providing a brand-new revenue stream for these growers, the plant will create 85 full-time jobs at the plant and more than 150 seasonal local jobs in Iowa.
“Iowa has a rich history of innovation in agriculture,” said Iowa Gov. Terry Branstad. “Today we celebrate the next chapter in that story, using agricultural residue as a feedstock for fuel, which brings both tremendous environmental benefits to society and economic benefits to the state. The opening of DuPont’s biorefinery represents a great example of the innovation that is possible when rural communities, their government and private industry work together toward a common goal.”
The majority of the fuel produced at the Nevada, Iowa, facility will be bound for California to fulfill the state’s Low Carbon Fuel Standard where the state has adopted a policy to reduce carbon intensity in transportation fuels. The plant also will serve as a commercial-scale demonstration of the cellulosic technology where investors from all over the world can see firsthand how to replicate this model in their home regions.
DuPont’s achievement provides the technology that will transform the U.S. fuel supply enabling a transition to fulfill the original cellulosic ethanol volume targets as Congress intended when it passed the Renewable Fuel Standard, a regulation established in 2005 to encourage growth and investment in sustainable fuel solutions. Earlier this month, DuPont and America’s Renewable Future released new poll findings that suggested Iowa caucus-goers from both parties – 61 percent of Republicans and 76 percent of Democrats – would be more likely to vote for a presidential candidate who supports the Renewable Fuel Standard and renewable fuels.
To check out a video of DuPont’s process for converting biomass to cellulosic ethanol, click here: www.youtube.com/watch?v=77Mu-0fGJ2s&feature=youtu.be.
DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802. The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment. For additional information about DuPont and its commitment to inclusive innovation, please visit www.dupont.com/.
Forward-Looking Statements: This document contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “believes,” “intends,” “estimates,” “anticipates” or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company’s strategy for growth, product development, regulatory approval, market position, anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring actions, outcome of contingencies, such as litigation and environmental matters, expenditures and financial results, are forward looking statements. Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the company’s control. Some of the important factors that could cause the company’s actual results to differ materially from those projected in any such forward-looking statements are: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; ability to respond to market acceptance, rules, regulations and policies affecting products based on biotechnology; significant litigation and environmental matters; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; global economic and capital markets conditions, such as inflation, interest and currency exchange rates; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, weather events and natural disasters; ability to protect and enforce the company’s intellectual property rights; successful integration of acquired businesses and separation of underperforming or non-strategic assets or businesses, including timely realization of the expected benefits from the separation of Performance Chemicals. The company undertakes no duty to update any forward-looking statements as a result of future developments or new information.
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The “Rule of 72” is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.
The Rule of 72 is a great mental math shortcut to estimate the effect of any growth rate, from quick financial calculations to population estimates. Here’s the formula:
Years to double = 72 / Interest Rate
This formula is useful for financial estimates and understanding the nature of compound interest. Examples:
- At 6% interest, your money takes 72/6 or 12 years to double.
- To double your money in 10 years, get an interest rate of 72/10 or 7.2%.
- If your country’s GDP grows at 3% a year, the economy doubles in 72/3 or 24 years.
- If your growth slips to 2%, it will double in 36 years. If growth increases to 4%, the economy doubles in 18 years. Given the speed at which technology develops, shaving years off your growth time could be very important.
You can also use the rule of 72 for expenses like inflation or interest:
- If inflation rates go from 2% to 3%, your money will lose half its value in 24 years instead of 36.
- If college tuition increases at 5% per year (which is faster than inflation), tuition costs will double in 72/5 or about 14.4 years. If you pay 15% interest on your credit cards, the amount you owe will double in only 72/15 or 4.8 years!
The rule of 72 shows why a “small” 1% difference in inflation or GDP expansion has a huge effect in forecasting models.
By the way, the Rule of 72 applies to anything that grows, including population. Can you see why a population growth rate of 3% vs 2% could be a huge problem for planning? Instead of needing to double your capacity in 36 years, you only have 24. Twelve years were shaved off your schedule with one percentage point.
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What is a Trust Fund?
In short, a trust fund is something that’s set up for the purpose of benefiting another person or group. There are numerous types of trust funds, and the specifics and structures may vary depending the account is established and relying on its reason. Any type of trust fund will involve some sort of property of value — whether it’s money in the shape of cash, stocks, mutual funds, or bonds or whether it’s a piece of real estate.
We’ll give you the deets on the fundamentals — including the parties involved in any trust fund account, and we’ll then fill you in on what a trust fund looks like, how it relates to taxes, and why any person would handle their money or assets in this manner.
Who’s Who in a Trust Fund
When dealing with money, you better have a good understanding of the main players involved. Regardless of your relationship with the grantor, trustee or beneficiary, and even if you’re dealing with a family member you know is a responsible person, it’s important to understand how any person functions in a financial relationship.
In any trust account, you’ll probably have at least three peeps involved:
- The grantor is the person who initiates and establishes the account. Maybe you’ve got a friend whose grandmother set up a trust fund account so that she (your pal) will one day receive some sort of asset. In this case, your pal’s grandmother is the grantor.
- If you want to set up a trust fund so that your son will eventually get $40,000 at a particular time in his life, you’d be the grantor. In any arrangement, the grantor is the person who’s providing or donating something to the account, and is also the person answerable for determining and overseeing how it’s controlled.
- The beneficiary is the person who is benefitting from the trust fund. (In relation to the above examples, the beneficiary would be your friend or your son, respectively). Despite the fact that the beneficiary isn’t controlling the property, he or she is the person who’s meant to benefit from the assets involved.
- The trustee, who often gets paid a fee for management, is the person who’s tasked with overseeing that everything plays out as it’s supposed to. The trustee can be a man or woman or multiple advisors (if you set up a trust fund for your child, for instance, you might appoint your sister or your parents as the trustee(s)), or it can be an institution (you might choose to have the trust department at a bank be the trustee, in which case the bank would choose a staff member to ensure that the account is used as the grantor dictated it should be.)
Why Do People Use Trust Funds?
Some people use the money to fund travels around the world; others use it to pay for education or a mortgage. A trust account can be set up for a variety of motives, but oftentimes it’s initiated by grandparents or parents for their grandchildren or children. A child trust fund, for instance, might be set up for a child so he or she will receive a certain amount of money at age 18 when heading to college or traveling the world. The grantor might decide that the beneficiary will receive $50,000 for education at age 18, and an additional amount of money post-graduation.
Some also set up a bypass trust to help plan for the future of their estate after they pass away. This type of account is an irrevocable trust, meaning it can’t be changed or terminated unless the beneficiary approves (a revocable trust, on the contrary, gives the grantor the right to modify the trust). Nevertheless, the grantor will decide the beneficiary’s rights to withdraw, and can limit the beneficiary's rights to distribute the assets of the trust.
Mothers and Fathers would possibly set up a bypass trust so that after their death, their money and/or real estate or other assets ( will be passed on to their children, and their children won’t have to pay estate taxes on those assets.
The IRS will not honor a bypass trust unless it’s prepared properly, so it’s wise to set up any bypass trust with an attorney by your side.
In fact, the same goes for all kinds of trust funds, which, if structured properly under the guidance of an attorney, can include tax advantages like maximizing estate tax bypasses.
How Old to Do You Need to Be to Get Access to Your Trust Fund?
So you want to claim your money? As a trust beneficiary, you have rights regarding the trust, but you should understand the wording in your documents well. If you don't, you should hire an estate attorney to ensure that the trust is operating as it should. You have the right to payments allotted to you by the trust's name, though there may be trust restrictions. For example, the trust might stipulate that the money used only for certain purposes (like educational expenses), and they may require a receipt from the beneficiary as proof. They can also set a specific age for you to take control of the assets. But, generally speaking, you can access your trust fund only after you reach adulthood, generally accepted at age 18.
What’s the Trust Fund Recovery Penalty?
The kinds of trust funds we’ve just outlined should now be confused with a term you may have heard of: the Trust Fund Recovery Penalty, which has to do with payroll taxes that business have to pay.
These taxes are meant to be withheld from employees’ wages, but oftentimes businesses or principals delay paying them so they can use those funds for other reasons. When the IRS finally comes along and those unpaid taxes have added up, they may issue tax lien notices or penalties against the business.
“There are three components of Federal employment tax: Federal income tax withheld from employees’ wages; Federal Social Security and Medicare taxes withheld from employees’ wages; and employer matching Social Security and Medicare tax,” explains Forbes writer Stephen J. Dunn. “The withheld Federal income tax and withheld Social Security and Medicare tax are called ‘trust fund’ taxes. Trust fund taxes that are withheld from employees’ wages but not remitted to the Federal government can be assessed personally against the ‘responsible persons’ of the business. Such an assessment is called a ‘trust fund recovery penalty.’”
How Do You Open a Trust Fund?
There are a few steps to setting up a trust fund if you're on the giving end of it. Here they are broken down:
Decide What You Want Your Trust to Accomplish and How
Specifically, you'll need to decide on your people involved in the trust, who the beneficiaries and contingent beneficiaries will be, how the assets will be managed or invested, how long the trust will last and whether it can be changed. Once you know all that, you can go ahead with opening a trust.
Visit a Reputable Estate Planning Attorney to Create a Declaration of Trust and the Trust Instrument
You'll want to go to an attorney in the state in which you want the trust fund domiciled. The trust law differs from state to state, but it has standardized a bit over the years thanks to the Uniform Law Commission, which works to promote uniformity of statutes throughout the United States. Talk with an attorney to create your trust in your state.
Register the Trust with the IRS to Receive a Taxpayer Identification Number (TIN)
According to The Balance, "if the trust is not a grantor trust which the person donating the property is the sole trustee and retains certain powers, such as the right to revoke or modify certain portions of the trust instrument and therefore must report the trust assets and income under his or her personal Social Security Number on his or her Federal and State tax filings, the trust fund will need to request its own taxpayer identification number, or TIN."
Transfer the Property You Are Gifting to the Trust Fund
You will need to retitle it and open financial accounts in the trust's name.
What Are Other Trust Funds?
There are other trust funds about which you should be aware. Here are three major trust fund types.
1. Medicare Trust Fund
According to the Tax Policy Center: "The Medicare trust fund comprises two separate funds. Tthe hospital insurance trust fund is financed mainly through payroll taxes on earnings and income taxes on Social Security benefits. The Supplemental Medical Insurance trust fund is financed by general tax revenue and premiums paid by enrollees."
2. Social Security Trust Fund
According to the Social Security Administration: "The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits."
3. Charitable Trust Fund
According to Find Law: "Charitable trusts are trusts which benefit a particular charity or the public in general. Typically charitable trusts are established as part of an estate plan to lower or avoid imposition of estate and gift tax. A charitable remainder trust (CRT) funded during the grantor's lifetime can be a financial planning tool, providing the trustmaker with valuable lifetime benefits. In addition to the financial benefits, there is the intangible benefit of rewarding the trustmaker's altruism as charities usually immediately honor the donors who have named the charity as the beneficiary of a CRT."
Does a Trust Fund Make Sense For You?
There are dozens of types of trust funds, so if you’re considering using one, it’s essential to educate yourself on the different styles of accounts and the purposes of each. You should certainly consult financial and legal experts before making any decisions. There may be better ways to manage your money and save.
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- What makes up a firm’s external macro environment, and what tools do strategists use to understand it?
The world at large forms the external environment for businesses. A firm must confront, adapt to, take advantage of, and defend itself against what is happening in the world around it to succeed. To make gathering and interpreting information about the external environment easier, strategic analysts have defined several general categories of activities and groups that managers should examine and understand. Exhibit 8.4 illustrates layers and categories found in a firm’s environment.
A firm’s macro environment contains elements that can impact the firm but are generally beyond its direct control. These elements are characteristics of the world at large and are factors that all businesses must contend with, regardless of the industry they are in or type of business they are. In the Exhibit 8.4, the macro environment is indicated in blue. Note that the terms contained in the blue ring are all “big-picture” items that exist independently of business activities. That is not to say that they do not affect firms or that firm activities cannot affect macro environmental elements; both can and do happen, but firms are largely unable to directly change things in the macro environment.
Strategists study the macro environment to learn about facts and trends that may present opportunities or threats to their firms. However, they do not usually just think in terms of SWOT. Strategists have developed more discerning tools to examine the external environment.
PESTEL is a tool that reminds managers to look at several distinct categories in the macro environment. Like SWOT, PESTEL is an acronym. In this case, the letters represent the categories to examine: political factors, economic factors, sociocultural factors, technological factors, environmental factors, and legal factors. When using PESTEL to analyze a specific firm’s situation, overlap between different categories of PESTEL factors can sometimes happen just as it can with SWOT.
Remember our earlier example: When urban millennials decide that car ownership is no longer attractive, car manufacturers’ sales are threatened. However, those same manufacturers might be able to adapt their sales methods to offer millennials car-sharing services, taking advantage of the opportunity to earn revenue from millennials who want access to cars for vacations or big shopping trips. PESTEL can also reveal multiple impacts from a single element in the external environment. For example, decreasing interest in car ownership among urban millennials would be a sociocultural trend. However, the technological connectedness of those same urban millennials is exactly what makes it possible for ride-sharing services such as Uber and Lyft to thrive: their services are app based and provide convenience both by connecting drivers and passengers quickly and by making transactions cashless.
Exhibit 8.5 illustrates the components of PESTEL, which will be discussed individually below.
Political factors in the macro environment include taxation, tariffs, trade agreements, labor regulations, and environmental regulations. Note that in PESTEL, factors are not characterized as opportunities or threats. They are simply things that a firm can take advantage of or treat as problems, depending on its own interpretation or abilities. American Electric Power, a large company that generates and distributes electricity, may be negatively impacted by environmental regulations that restrict its ability to use coal to generate electricity because of pollution caused by burning coal. However, another energy firm has taken advantage of the government’s interest in reducing coal emissions by developing a way to capture the emissions while producing power. The Petra Nova plant, near Houston, was developed by NRG and JX Nippon, who received Energy Department grants to help fund the project.6 Although firms do not directly make government policy decisions, many industries and firms invest in lobbying efforts to try to influence government policy development to create opportunities or reduce threats.
All firms are impacted by the state of the national and global economies. The increased interdependence of individual country economies has made evaluating the economic factors in a firm’s macro environment more complex. Firms analyze economic indicators to make decisions about entering or exiting geographic markets, investing in expansion, and hiring or laying off employees. As discussed earlier in this chapter, employment rates impact the quantity, quality, and cost of employees available to firms. Interest rates impact sales of big-ticket items that consumers normally finance, such as appliances, cars, and homes. Interest rates also impact the cost of capital for firms that want to invest in expansion. Exchange rates present risks and opportunities to all firms that operate across national borders, and the price of oil impacts many industries, from airlines and transportation companies to solar panel producers and plastic recycling companies. Once again, any scenario can be a threat to one firm and an opportunity to another, so economic forces should not be assumed to be intrinsically good or bad.
Quite possibly the largest category of macro environmental factors an analyst might examine are sociocultural factors. This broad category encompasses everything from changing national demographics to fashion trends and many things in between. Demographics, a subset of this category, includes facts about income, education levels, age groups, and the ethnic and racial composition of a population. All of these facts present market challenges and possibilities. Firms can target products to specific market segments by studying the needs and preferences of demographic groups, such as working women (they might need day-care services but not watch daytime television), college students (who would be interested in affordable textbooks but couldn’t afford to buy new cars), or the elderly (who would be willing to pay for lawn-mowing services but might not be interested in adventure tourism).
Changes in people’s values and interests are also included in this category. Environmental awareness has spurred demand for solar panels and electric and hybrid cars. A general interest in health and fitness has created industries in gyms, home gym equipment, and organic food. The popularity of social media has created an enormous demand for instant access to information and services, not to mention smartphones. Values and interests are constantly changing and vary from country to country, creating new market opportunities as well as communication challenges for companies trying to enter unfamiliar new markets.
The rise of the Internet may be the most disruptive technological change of the last century. The globe has become more interconnected and interdependent because of the fast, low-cost communications the Internet provides. Customer service agents in India can serve customers in Kansas because technology has advanced to the point that the customer’s account information can be instantly accessed by the service provider in India. Entrepreneurs around the world can reach customers anywhere through companies such as eBay, Alibaba, and Etsy, and they can get paid, regardless of their customers’ currency, through PayPal. The Internet has enabled Jeff Bezos, who started an online bookselling company called Amazon in 1994, to transform how consumers shop for goods.
How else have technological factors impacted business? The Internet is not the only technological advance that has transformed how businesses operate. Automation has increased efficiency for manufacturers. MRP (materials requirement planning) systems have changed how companies and their suppliers work together, and global-positioning technology has helped construction engineers manage large projects more accurately. Consumers and firms have nearly unlimited access to information, and this access has empowered consumers to make more-informed buying decisions and challenged firms to develop ways to analyze the large amounts of data their businesses generate.
The physical environment, which provides natural resources for manufacturing and energy production, has always been a key part of human business activity. As resources become scarcer and more expensive, environmental factors impact businesses more every day. Firms are developing technology to operate more cleanly and using fewer resources. Political pressure on businesses to reduce their impact on the natural environment has increased globally and dramatically in the 21st century. In 2017, London, Barcelona, and Paris announced their plans to ban cars with internal combustion engines over the next few decades, in order to combat air-quality issues.7
This external environment category often overlaps with others in PESTEL because concern for the environment is also a sociocultural trend, as more consumers look for recycled products and buy electric and hybrid cars. On the political front, firms are facing increased regulation around the world on their carbon emissions and natural resource use. Although SWOT would characterize these factors as either opportunities or threats, PESTEL simply identifies them as aspects of the external environment that firms must consider when planning for their futures.
Legal factors in the external environment often coincide with political factors because laws are enacted by government entities. This does not mean that the categories identify the same issues, however. Although labor laws and environmental regulations have deep political connections, other legal factors can impact business success. For example, in the streaming video industry, licensing fees are a significant cost for firms. Netflix pays billions of dollars every year to movie and television studios for the right to broadcast their content. In addition to the legal requirement to pay the studios, Netflix must consider that consumers may find illegal ways to view the movies they want to see, making them less willing to pay to subscribe to Netflix. Intellectual property rights and patents are major issues in the legal realm.
Note that some external factors are difficult to categorize in PESTEL. For instance tariffs can be viewed as either a political or economic factor while the influence of the internet could be viewed as either a technological or social factor. While some issues can overlap two or more PESTEL areas, it does not diminish the value of PESTEL as an analytical tool,
- Describe a firm’s macro environment.
- What does PESTEL stand for? How do managers use PESTEL to understand their firm’s macro environment?
Sustainability and Responsible Management: Can LEGO Give up Plastic?
“In 2012, the LEGO Group first shared its ambition to find and implement sustainable alternatives to the current raw materials used to manufacture LEGO products by 2030. The ambition is part of the LEGO Group’s work to reduce its environmental footprint and leave a positive impact on the planet our children will inherit.”8
Danish toy company LEGO announced in 2015 that it would invest almost $160 million dollars into its efforts to meet the goal it announced in 2012. You know LEGO—they are the colored plastic bricks that snap together to make toys ranging from Harry Potter castles to Star Wars fighter craft. The family-owned company was founded in 1932 by Ole Kirk Christiansen and has since grown to be the world’s number one toy brand.9
Given that LEGO and plastic seem to go hand in hand, why would the company want to give up on the material that makes their toys so successful? LEGO’s manufacturing process relies on plastic to make highly precise plastic bricks that always fit together securely and easily. Replacing the plastic with another material that is durable, can be brightly colored, and can be molded as precisely is a difficult task. LEGO’s leadership has decided that a strategic position based on fossil fuels is not sustainable and is making plans now to transition to a more environmentally friendly material to manufacture its products.
Switching from oil-based plastic might make economic sense as well. Manufacturers who rely on petroleum-based products must weather volatile oil prices. LEGO’s raw materials costs could skyrocket overnight if the price of oil climbs again as it did in 2011. That price spike was due to conflict in Libya and other parts of the Arab world,10 something entirely beyond the control of any business.
Technological innovations in bio-based plastics may be the answer for LEGO,11 which is working with university researchers around the globe to find a solution to its carbon-footprint problem.
Sources: Trangbæk, Roar Rude (2016). “LEGO Group to invest 1 Billion DKK Boosting Search for Sustainable Materials.” https://www.lego.com/en-us/aboutus/news-room/2015/june/sustainable-materials-centre. Accessed July 29, 2017; Brand Finance (2017). “Toys 25 2016.” http://brandfinance.com/images/upload/brand_finance_toys_25_2017_report_locked.pdf Accessed July 29, 2017; Holodny, Elena (2016). TIMELINE: The tumultuous 155-year history of oil prices. Business Insider. http://www.businessinsider.com/timeline-155-year-history-of-oil-prices-2016-12 Accessed July 29, 2017; and Peters, Adele (2015). “Why LEGO is Spending Millions to Ditch Oil-Based Plastic.” Fast Company. https://www.fastcompany.com/3048017/why-lego-is-spending-millions-to-ditch-oil-based-plastic Accessed July 29, 2017.
- How would you approach this issue if you were the manager in charge of sourcing raw materials for LEGO? How would PESTEL analysis inform your actions?
- What PESTEL challenges is LEGO trying to address by changing the raw materials used in its products?
- Explain what favorable PESTEL factors support LEGO’s efforts.
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If you are looking for lower risk investing strategies, something you may wish to consider learning about is how to buy bonds. Investing in bonds as a beginner is not difficult to do, and it can yield a nice return on your investment. It is not a fast way to make money, but it can possibly lead to better gais over time, depending on which bond investment strategies you wish to pursue.
Keep in mind, just because bonds are considered low-risk, this does not always mean they are the best way to invest your money. There are a lot of factors to consider – you also have to take into account the opportunity cost.
If you have all of your cash for investing tied up in bonds, you may miss out on other opportunities. You also have to take into account that some bonds may not always keep up with inflation.
Still, if you wish to invest without a lot of risk, you certainly may find this information on how to invest in bonds for beginners helpful.
What is The Bond Market?
The bond market revolves around buying and selling bonds. What is a bond? Bonds essentially are a loan, except in this case, you are the “bank” – the person issuing the bond owes you whatever money you paid to buy the bond. Bonds typically are purchased from the government, financial institutions, and companies.
The way bonds are most different from stocks is that the market value of a bond does not fluctuate as much because these types of investments usually have a set time limit. For example, if you bought a savings bond that needs to mature a minimum of 10 years, you’ll find that it’s not really all that valuable, especially when you factor into things like inflation.
Here is an example: The $50 savings bond a relative purchased for us when my son was born has matured and netted us a whopping $12. Considering that was $50 we could not touch or use for that time period while we waited for it to mature, and considering $50 20 years ago is nothing like what $50 is today, it really was not the wisest way to invest $50.
However, this is not to say bonds are a bad idea. After all, it did ensure we did not spend that $50, and in that regard, it is better to have $50 saved. Also, savings bonds typically have not performed well, and there are many different types of bonds one can explore.
Buying Treasury Securities Bonds:
These are bonds which are basically fixed-interest U.S. government debt securities with a minimum maturity rate of 10 years.
Treasury security bonds can be purchased from your bank/financial institution or a broker or dealer specializing in the buying and selling of treasury bonds.
Investing in Public Works: Buying Bonds in Municipal Securities
Municipal securities are one example of the types of bonds which exist on the market. This bond market revolves around raising the funds necessary to improve public works systems and public buildings, such as a school. On a local level, this can give you a way to help bring improvements to where you live and to gain a bit of return on your investment.
How to Buy Bonds: Understanding the Basics
You can buy bonds through a number of methods. Banks and brokerage firms typically remain the most popular method of finding bonds to purchase. However, there are also bond dealers who sell secondary market bonds, and occasionally you can buy them from the local government directly, depending of course on the location and what is available.
The local municipal bonds security market is not always easy to get into. The retail order period is when the bond is first open, and this is typically reserved for well established investors. The primary market is a bit easier, however you will still need to go through your financial institution to explore what options may be available for your level of investment.
Typically, bonds on the primary market will start at about $1,000 each. The financial institution where you purchase the bonds will be able to give you a schedule for what types of rates you may expect based on maturity.
There is also the secondary market to buy bonds. In this case, you will likely encounter a mark-up cost on the bond, as you will be most likely buying them with a mark-up fee and commission added on to the price of the bond.
This may still be less than the face value of the bond, but it is something to factor in, because it can naturally affect your overall bottom line and make you wonder if it is even worth the time to invest in bonds.
The easiest and most simple way to start buying bonds is to walk into your bank or call your bank to make an appointment to discuss all of the different options and what returns on the investment may currently be available.
Buying Bonds Through Mutual Funds
Another way to buy bonds is through municipal bond mutual funds. We have talked about mutual funds and EFTs on our blog before – and mutual funds generally are a far less riskier investment than most stocks.
Mutual funds can sometimes perform for a little bit of a better picture for a return on investment, although it is best you speak to a financial advisor licensed where you live for specific information on just how well it may perform for you.
You can buy a mutual fund through most online stock brokers, as well as through mutual fund companies. This gives you a way to diversify your stock trading portfolio into a number of different possible investment strategies.
Should You Invest Short Term or Long Term?
A common question is what is a good term length for a bond. Typically, most bonds will have a set interest rate and payment schedule, with a minimum maturity time. This minimum set period of time is a time where you absolutely cannot cash out on a bond unless you choose to sell to a dealer, and in that case you will likely lose money instead of make any return on an investment.
The treasury securities market, for instance, has bonds that will not mature until after a minimum of ten years has passed. Some bonds may have shorter timeframes, such as one year, but the return on these short-term bonds is typically not a significant amount. Still, if you want to ensure you do not spend the cash and have a decent amount to set aside, it is better than collecting zero interest.
How Investing in Bonds Works
Bond investing works the same way as you might expect with most other types of investments. You choose how much money to put in, purchase the bond, and then you cannot get the money back until the bond matures. For this reason, is is very important to understand this is a very long-term investment strategy. It is NOT like day trading or even swing trading by any means!
Most bonds typically will have a fixed value that they are worth. For example, a bond may have a face value of $100. You cannot buy a $10,000 bond if the bond is only available in $100 increments. If you wanted to invest $10,000 on a specific type of bond, you would have to do the math to determine how many bonds you need to buy.
For example, if you have $10,000 you want to invest, and the value of the bond is $100, you would need to divide $10,000 by $100 to find out how many bonds to buy, which in this case is 100.
Cashing In on Bonds
Typically to cash in on a bond, you can this through most reputable financial institutions. This is easy to do for most types of bonds.
You can also sell your bonds prior to the maturity date to a secondary market dealer. but you certainly are not going to get a very good return on investment – you could even potentially lose money on that deal. Since bonds are a long term investment, it’s typically a wiser choice to invest in if you know you will have enough to get by without the temptation of needing to cash in the bond before its maturity date.
Now that we’ve gone over the basics for how to buy bonds for beginners, you are ready to start considering about how you will invest your money for the future. If you are looking for information on something that is a little more exciting and has a bit more potential for faster return, you may also wish to check out these options:
Do you have any questions about investing in bonds? have you had any experiences with buying bonds you’d like to share? Comments are always welcomed below!
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Markets are constantly rising and crashing and traders always try to work out what makes this happen. Let’s discuss the 4 key indicators that move the stock market.
Even the most experienced traders are unable to pinpoint the exact reasons for the market’s violent mood swings because there exist a plethora of factors, the combination of which leaves stockholders richer or poorer at the end of the day. Corporate earnings, political upheavals and market sentiment in general are the prime market movers. But the country’s overall economic condition has the biggest influence in its long-term performance. Therefore, the four key indicators that actually move the market are GDP or Gross Domestic Product (GDP), inflation, labour market conditions and consumer & investor activity. These, in their totality, along with their respective positions in the economic cycle’s current stage broadly affect the share market.
GDP or Gross Domestic Product (the country’s total output in terms of services and goods over a given time period) is a crucial component of inflation. Yet, it also becomes an important economic indicator. When the GDP of the current year is compared to that of the previous year, it indicates how slowly or fast the country’s economy is contracting or growing. GDP is measurable by either totaling up the economy’s earned income or the economy’s spending power. Both measures are roughly equal.
The gross domestic inflow or income comprises salaries and wages, profits of corporate houses, interest amounts that lenders have collected as also the sum total of taxes the government has in its kitty. The GDP domestic expenditure, on the other hand, comprises consumer spending, investments in the housing sector, government & business spending (building and expansion of factories, inventory and equipment) and the balance of trade (BOT).
The GDP affects inflation and thus, impacts the stock market. It has come to be recognized as a principal indicator of a country’s economic activity as also economic prospects of investors in future. Thus, significant GDP changes sharply impact investing sentiment. When investors actually see the economy improving along with higher corporate earnings, they tend to pay premiums for stocks. On the flip side, a declining GDP directs them towards buying stocks at lower prices, putting the stock market in a tailspin.
The stock market also reversely affects economic activity by a concept known as a wealth effect. This is actually a stock market fall that erodes an investor’s personal or perceived wealth and which forces him to stop spending. With consumer spending representing around 66% of the GDP, a minute change in overall consumption has a notable effect on the GDP. This implies that when stock markets falls, they cause the GDP to dip even further, intensifying the downward spiral of the market.
Inflation determines the degree to which an investment’s real value has eroded as also the return rate required to compensate that erosion. In order to combat market risk, a risk premium is receivable and this should be above the current inflation rate. A higher inflation rate implies a higher return on investments, particularly in equity markets. Inflation’s main impact on equity prices actually arises from its effect on corporate earnings. Lower inflation makes company costs dip while increasing their profits. This makes low inflation a better option for markets.
A country’s employment potential is undoubtedly a major gauge of its economic progress and has a great impact on its stock and bond markets. This is measurable on a daily basis with one-day movements of all stocks being recorded and analyzed carefully, particularly after the country’s monthly employment & unemployment statistics have been announced. Employment also significantly influences the sentiments of consumers and their confidence, which in turn, regulate their investment potential in stock markets. This is clearly reflected in the average monthly performance of the market. With unemployment on the rise, corporate profits are most likely to get adversely affected. This is deducible from the fact that spiraling unemployment leads to a situation where people are not able to make heavy investments, particularly in housing or even indulge in appropriate purchases that drive corporate profits.
Consumer & Investor Activity
When activity levels of consumers fluctuate, it directly impacts corporate profits as also stock prices. Consumer confidence assumes significance here as a more confident consumer is most likely to spend more. The reverse happens when their confidence in the economy dips. With markets being usually forward looking, stock prices usually tend to reflect consumers’ future opinions. Investor activity in housing and real estate is also indicative of whether people intend to make heavy investments. Investor sentiment dictates investor activity and lower interest rates tend to push stock prices higher.
It is established that all the four indicators share a symbiotic relationship and how each affects the stock market becomes difficult to judge. The government’s monetary and fiscal policies influences any country’s economy substantially. Increased GDP, or decreasing unemployment make the market move up while higher inflation causes it to fall.
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Yellen Makes the Case for Reducing Inequality
“The extent of and continuing increase in inequality in the United States greatly concerns me. The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression. By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then. It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.”
This excerpt from a speech given by Federal Reserve Chair Janet Yellen last week in Boston highlights the theme of her presentation – the link between income and wealth inequality, economic opportunity, and economic mobility. Her speech contained plenty of shocking facts – like that the wealthiest 5 percent of American households held 63 of all wealth reported in 2013, while those in the lower half of the wealth ladder held only 1 percent (and the gap between these figures has been growing since 1989). But she also pointed to the influence that economic opportunity has on economic mobility and inequality over time. She called out four “building blocks for opportunity”: resources available for children, affordable higher education, business ownership, and inheritances.
She supported her selection of the building blocks with evidence, including a nod to research showing that low-income kids who have a quality early childhood education are more likely to graduate from high school, attend college, hold down a job, and make more money, and are less likely to go to jail or receive on public assistance She also noted that families who have greater resources can better afford to pay for things that research shows leads to increased future earnings and other economic advantages as adults. In addition, she noted the importance of the social safety net in offsetting disparities in family resources for kids, and the importance of college as an economic opportunity for most people.
Many agreed with Yellen’s statement. Lawrence Mishel from the Economic Policy Institute expanded on the link Yellen made between income and wealth inequality and opportunity. He notes that children who grow up poor face many challenges related to their poverty level that often limit their ability to succeed in the classroom, and that these disadvantages should be addressed in the services provided to them, while at the same time helping their families to move out of poverty by focusing on wage growth.
As could be expected, not everyone loved Yellen’s speech. Michael Strain from the American Enterprise Institute even said that Yellen’s remarks put her “in danger of becoming a partisan hack.” However, a new poll found that an overwhelming 79 percent of Americans – including a majority of Democrats, Independents, and Republicans – favor increasing federal funding for programs that address children’s needs in areas like early childhood education, healthcare, nutrition and well-being.
Yellen should be applauded for taking seriously her responsibility to keep the economy and job growth strong by making the case for programs that help, whether everyone likes them or not. And she should be applauded for embracing the job creating, unemployment-reducing mission of the Fed, and doing so in a way that sees reducing inequality as a vital part of getting to full employment and greater prosperity.
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IF 2020 WILL be remembered for the devastation and suffering caused by the covid-19 pandemic, the hope is that 2021 will be seen as the turning-point in the outbreak. This is not just wishful thinking. In 2021 we should begin the largest and most rapid global deployment of vaccines the world has ever seen. If successful, it will mark the beginning of the end of the crisis.
This can happen only if we are first successful in developing safe and effective covid-19 vaccines, and if those vaccines are made simultaneously and fairly available to people in all countries, regardless of their wealth. In normal circumstances those are two very big “ifs”. Normally it takes more than a decade to develop a vaccine, and people in rich countries get it first.
But these are extraordinary times. The response to this crisis from scientists and vaccine-manufacturers has been unprecedented, with more than 200 candidate vaccines in development and dozens already in advanced clinical trials. Equally, the way global leaders have responded has been unparalleled, with most governments looking beyond the immediate needs of their citizens in favour of a solution that benefits everyone. Not since the Paris climate agreement have we seen such global co-operation and solidarity, and never before in the face of such an immediate and existential threat.
One reason why this kind of global approach is so important, and why governments of wealthy countries are willing to let people in the poorest parts of the world get vaccinated before millions of their own citizens, is quite simply that it is necessary. The sooner people in all corners of the world are protected, the sooner we can end the acute phase of this pandemic, allow life to return to some semblance of normality and reboot our economies. Because as long as large reservoirs of the virus are allowed to persist, the threat of resurgence will remain.
A global exit strategy also offers our best chance of success. There is a good reason why vaccines normally take so long to develop; it is extremely difficult. Those at the preclinical stage, before human trials, typically have less than a 10% chance of success. If they make it to human trials, that rises to less than 20%. In the face of such odds, our best option is working together and hedging our bets. By pooling investment and sharing risk, countries are collectively backing the development of a larger number of vaccines, increasing the chance of success. That has n0t stopped governments pursuing bilateral deals with manufacturers to secure the doses they need for their citizens, as several wealthy nations have done. But by joining the collective effort, too, they in essence have an insurance policy, guaranteeing themselves other vaccine doses even if their bilateral deals fail—and in the process throwing a lifeline to other countries, which would otherwise have limited or no access.
All this is what COVAX was created to do. Involving nearly 90% of the world’s governments, and co-ordinated by my organisation, Gavi, along with the Coalition for Epidemic Preparedness Innovations and the World Health Organisation, COVAX maximises our chances of getting safe and effective vaccines, and being ready to produce them quickly at scale. The initial aim is to provide 2bn doses by the end of 2021, which should be enough to protect high-risk and vulnerable people, as well as front-line health-care workers.
We still have a long way to go, first in getting the vaccines through trials, getting them approved and licensed, and ensuring manufacturing is in place so we can move quickly. We are also working to ensure that the infrastructure, supply chains and vaccinators are in place to distribute billions of doses at speed. And all this at a time when health systems have been disrupted by the pandemic and an infodemic of misinformation is threatening to undermine public confidence in vaccine safety.
Nevertheless, despite such challenges, the fact that we have come this far bodes well, not just for how quickly we end this pandemic, but for future preparedness and resilience for the next one. Because there will be a next one; the emergence of novel viruses of pandemic potential is an evolutionary certainty. More than just a multilateral solution to a global crisis, COVAX is also the first step in a collective learning process to improve our global defences—our disease surveillance, early-warning systems and response mechanisms—across the entire world, to ensure that the next time this happens, we are better prepared to act.■
This article appeared in the Science and Technology section of the print edition of The World in 2021 under the headline “A vaccine for everyone”
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Today, most of the people are aware of digital currencies. Digital currency is the form of currency that is available only in the electronic form. They do not have any physical forms like notes or coins. One of the popular forms of digital currency is Bitcoin. Investing in bitcoin is growing in popularity as it helps to earn more profits. But many people start bitcoin trading without the proper understanding. You will have risks in all other investments, likewise investing in digital currency has some risks. The bitcoin price can increase or decrease over a short period of time, which is completely unpredictable. Without knowing the price of bitcoin, you should not buy or sell bitcoin.
Bitcoin is relatively safe due to cryptography and robust protocols. They are readily available through several exchanges. The demand for bitcoin is increasing day by day due to its popularity. So, the availability is shrinking. This results in increased prices. The bitcoin price fluctuates for various reasons that include speculation, availability, and media coverage. When people hear something negative about bitcoin, they sell their shares. With the positive press, people more likely to invest in bitcoin.
The basic concept of bitcoin working is the same as the many currencies that work around the world. Bitcoin works as a decentralized peer to peer virtual currency. This means that there is no one to regulate bitcoin transactions. One can make the transaction without the involvement of a middleman. Bitcoin exchanges use private keys to increase security. One of the best technologies blockchain is used. All the transaction are recorded in a public ledger. Bitcoin works completely transparent, and everyone could see the changes in the system. There are only some basic requirements needed to invest or trade in bitcoin.
One should be aware of the digital wallet, which helps to store bitcoin. Bitcoin wallets are available in both hardware and software. Software wallets are preferred by many investors as they are easy to access. On the other hand, hardware wallets are considered to be more secured, which prevents hacking. The transaction rates are much lowered when compared to the traditional methods. The blockchain verifies the transactions whether they are accurate when one pays using the bitcoin. If one need adds a block to the blockchain, then one has to solve the complicated math problem. This process is known to be mining. Once the problems are solved miners are rewarded with the bitcoins.
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Pare, pair and pear. There’s nothing more confusing than words that sound the same but have completely different meanings.
In real estate jargon, “escrow” is such a word. There are three separate and distinct uses for the word “escrow” in real estate and to those unfamiliar with the intricacies of real estate language, they can be fairly confusing.
First, let’s define the word. In lay person’s terms, escrow is a third-party holding tank, usually for money. The reason real estate professionals make frequent use of escrows is that they offer both sides of the transaction neutral territory in which to conduct business.
What are the three escrows of real estate? They are: A broker’s escrow, a real estate property tax and insurance escrow, and an escrow closing. Let’s take a close look at each one:
1). When buyers make an offer to purchase real estate, they often attach a check representing a portion of the cash down payment, sometimes as much as 5 percent of the purchase price. These funds show the seller that you are acting in good faith, and that you are willing to lose this money if for some reason, outside of the contingencies in the contract, you decide not to buy the seller’s home.
The check is immediately deposited into an escrow administered by the seller’s broker or your broker. As you move forward with the contract, you may give your broker additional checks to deposit into the escrow. When you close, the money in the escrow is credited toward your down payment. Most brokers agree that the interest on the money belongs to the buyer, not the seller.
The escrow works because you and the seller trust that the broker will not automatically return or divide the money should something go awry with the process. If there is a problem with the transaction, the money will be held until the dispute is resolved.
2). Lenders often require that you pay 1/12 of your property taxes and insurance premium each month along with your regular mortgage payment. In other words, you make these payments to the lender, and the lender then takes care of paying your property taxes and home insurance premiums.
Lenders call this service a real estate property tax and insurance escrow. When you purchase a home, they often charge a one-time fee of at least $60 to open and manage this escrow. Unless state law mandates it, they will not pay you any interest on the money they are holding.
The reason lenders do this is to protect their investment (the mortgage). If you fail to pay your property taxes, that property tax lien takes priority over the lender’s mortgage. In other words, if your home is sold at auction to pay your property taxes, the lender gets whatever is left, which may or may not cover your mortgage debt. If you fail to pay your property insurance, and your home burns down, you may not be able to repay your mortgage (or rebuild your home).
- The third type of escrow is an escrow closing. In an escrow closing, a disinterested third party (often called the “escrow holder”) holds and distributes legal documents and funds on behalf of a buyer and seller. The escrow holder or officer can be a title insurance company, established escrow firm, attorney, bank or S&L, and some states require the escrow holder to be licensed.
Buyers and sellers instruct the escrow holder to release funds and the deed only when certain conditions are met. The escrow instructions are specific. For example, they might spell out the conditions under which the escrow will terminate without closing. Or, they might spell out how real estate taxes will be prorated, or split, between the buyer and seller.
According to Alan Price, Central Division Manager for Chicago Title and Trust, escrow holders: Act as the depository for funds and documents; process and coordinate the flow of documents and funds; keep all parties informed on the progress of the escrow; respond to the lender’s requirements; secure a title insurance policy; obtain approvals of reports and documents from the parties as required; prorate and adjust property taxes, insurance premiums, electrical bills, rents, etc.; record the deed and loan documents, and, maintain the security and accountability of all money in the transaction.
Unfortunately, escrow officers do not take the place of real estate attorneys. According to Richard Klarin, a vice president of Chicago Title & Trust, escrow instructions are fairly standard, but without an attorney, details are not double-checked.
“Buyers who are not represented by an attorney would be well-advised to ask for a copy of the covenants, restrictions and easements to which the title insurance is subject,” Klarin says.
“And in the escrow instructions, the buyer should include that the purchase is subject to the review and approval of any covenants or restrictions and the approval of the location of the easements” he adds.
Published: Feb 6, 2005
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The landscape of the world economy is changing rapidly, including new and much more powerful roles for the IMF and World Bank, as well as the rapid growth of wider free trade areas in North America and Europe. Current global trading arrangements, however, involve serious obstacles for exporters from the South as well as rivalries between the major economies.
This book explores how the international trading system came into existence, the ways in which commodity markers work today, and why the poor countries of the South are facing not free trade, but unfair trade. It traces the stages of the world's economic development which has resulted in a this stark imbalance between North and South, following the chain of trade from crop to shop.
The book's lessons are relevant to students, policy makers, and all those interested in a world trading system built on more than market muscle and the profit motive - a system that serves the interests of ordinary people everywhere.
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As I outlined in my first blog post, I feel that cryptocurrencies will be one of the 3 factors that will drive change in our culture. Money is used by humans to communicate scarcity. It is an artificial construct and is only real because we humans think it is real. Money evolved out of a barter ledger that was locally managed by a trusted 3rd party (a common misconception is it was direct barter). So, if humans did not exist, money would not exist. I realize this is a simple explanation, the topic of money is complex and I recommend to get a quick primer on what money is. If you think it’s just digits in a bank account or paper in your wallet this is further reason to pay attention to this blog. Understanding the true nature of money will help you prepare for the future. View the video below for a quick overview of money from Peak Prosperity.
A relatively recent monetary innovation was the creation of Bitcoin. Bitcoin is a peer to peer network that is used to exchange digital value without a central authority’s (company/government) consent. Bitcoins are not actually sent over the internet, instead, transactions are recorded on a decentralized public ledger called the blockchain. See more on decentralization in my previous post, “Centralized vs Decentralized Systems”. Since the Bitcoin network is run by open source software and not controlled by any individual it allowed the system to be copied and replicated. The first replication of blockchain technology was Litecoin and that continues to this day where there are over 2000+ cryptocurrencies that can be purchased on the free market.
To keep the basic primer on cryptocurrencies simple, I will use Bitcoin as an example of how cryptocurrencies work. The Bitcoin public ledger consists of “blocks” that are created every 10 minutes and are recorded permanently to the blockchain (Take a look at https://insight.bitpay.com/). Who creates these blocks? Bitcoin miners do! Miners are the payment processing engine for Bitcoin. The miners are computers with specialized processors that listen to the Bitcoin network and record a list of all valid transactions that were made since the last block. As they gather the transactions they are also solving a mathematical “puzzle”. The first miner to solve the puzzle wins the block reward (currently 12.5 bitcoins) and publishes the block with all of the transactions they gathered for all other miners to see. All miners on the network then validate that this “puzzle” was solved correctly and then they start to mine the next block and repeat this process. The new block that they start mining references the block that was solved; they build on top of the previous block.
The transactions that miners are listening for are created by Bitcoin wallets. A Bitcoin wallet will typically generate and save a “private key”. A private key is 52 alphanumeric characters randomly generated by the wallet (interesting enough, it can even be created offline by rolling a single die many times). This private key gives the wallet holder control of the corresponding address (this key should be kept in a safe place and not shown to anyone). With this private key, the wallet software generates the corresponding Bitcoin address (this is the public address that you can show everyone) and scan the blockchain to determine how many bitcoins belong to that address. When someone sends bitcoins to another address the wallet will use the private key that it has stored to send out a signed message to the network indicating the quantity and address to which the bitcoins have been transferred.
What is interesting about this mechanic is that the creator of Bitcoin “Satoshi Nakamoto” actually used the power of computers to mimic the ancient method touched on at the beginning of this post. As mentioned, the ancient barter system that everyone has heard about was not a direct exchange of good. Instead, there was a local trusted ledger managed by a 3rd party that the community used to record transactions to keep account of who owed what to who. The blockchain is simply an evolution of this ancient idea on a global scale that is not controlled by any 3rd party entity and therefore cannot be corrupted.
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In finance, a loan is the lending of money from one individual, organization or entity to another individual, organization or entity. A loan is a debt provided by an organization or individual to another entity at an interest rate, and evidenced by a promissory note which specifies, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time.
The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.
Acting as a provider of loans is one of the principal tasks for financial institutions such as banks and credit card companies. For other institutions, issuing of debtcontracts such as bonds is a typical source of funding.
See full article https://en.wikipedia.org/wiki/Loan
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Annual percentage yield (APY) – definition and meaning
The Annual Percentage Yield or APY is the effective annual rate of interest that investors earn, including the effect of compounding. When we are not considering compounding, we refer to it as the nominal interest rate or simple annual interest rate.
We express the annual percentage yield as an annualized rate and base it on a 365-day year
The annual percentage yield is greater than the periodic interest rate times the number of periods because it is compound.
The APY is a standardized method for calculating compounded interest that an investor earned on an investment or deposit account.
Annual percentage yield vs. APR
The annual percentage yield is similar to the annual percentage rate or APR. Lenders use the APR for loans.
With an APR, lenders state the total borrowing costs as a single number, which they express as a percentage. APR total fees include, for example, mortgage insurance, mortgage origination fees, and other closing costs.
Both the APY and APR are standardized measures of interest rates. However, the APY considers only compounding periods and not account fees.
The APY is useful because it standardizes several interest-rate agreements into one annualized percentage figure.
APY refers to the yield that the customer receives. The APR, on the other hand, while the APR refers to the yield that the lender receives. In other words, APY and APR work in opposite directions.
Financial institutions will typically quote the APY rather than APR when promoting financial products that do not involve debts.
Let’s imagine, for example, that a financial institution quotes a **CD with a 4.65% APR. Compounded monthly for eight months, it will quote that CD as a 4.75 APY, rather than a 4.65% APR.
** CD stands for Certificate of Deposit. It is an interest-bearing, short- or medium-term debt instrument that a bank issues.
Example of annual percentage yield
Let’s imagine you placed $1,000 into an account for one year at 1% simple interest. Simple interest means non-compounding.
At the end of the year, you would have $1,010. The APY is 1% – in other words, the same as the interest rate.
Now, let’s suppose that the interest on that account compounded on a daily basis. The total interest you would receive for the year would be $10.05. Therefore, it would give you a total of $1,101.05 at the end of the year.
Hence, in this case, the annual percentage yield is 1.005%.
There are several calculating programs online to help you work out the APY.
According to BusinessDictionary.com, the annual percentage yield is:
“Standardized method for quoting compounded interest earned on a deposit account or investment. In computing APY, it is assumed the funds will remain on fixed deposit or invested for a full 365-day period.”
Video – What is Annual Percentage Yield?
This video explains the difference between APY and APR.
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