Archive for the ‘Other Grow’ Category

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Mercantilism is…

Wednesday, July 27th, 2011

Mercantilism is an economic theory that was popular in Europe during the 17th century.

The basic idea is that a country’s power and economic well-being come from having lots of precious metals around, like gold and silver. This leads to arguments against free trade and for protectionist trade policies. By gaining a trade surplus (i.e., exporting more than you’re importing), a country can collect more and more of these metals from other countries buying its goods.

While mercantilism is usually associated with European trade policies of the somewhat distant past, it still pops up in today’s world to describe a country that is acting in mercantilistic ways.

Embezzlement is…

Monday, July 25th, 2011

Embezzlement is taking something for personal gain that you’re supposed to be looking after for someone else.

It often happens in small amounts over time, and can sometimes go undetected for years. This is why accounting is so important – and why we need watchdogs like the U.S. Securities and Exchange Commission (SEC) to growl at offenders.

Examples of embezzlement include someone in charge of a trust or an investment fund snagging some of the money in their care, or those at the head of a nonprofit tweaking the books so that everything looks normal… while dollars secretly slip out the back door.

Economics is…

Thursday, July 21st, 2011

Economics is the study of how people choose to allocate scarce resources. Every resource is limited in some way – wood , metal, food, even your time – and economics is the study of how people distribute these resources. Modern economics is broken into microeconomics (study of individuals) and macroeconomics (the study of large-scale economies).

NAFTA is…

Thursday, July 21st, 2011

NAFTA is the North American Free Trade Agreement. In the 1990′s the United States, Canada, and Mexico negotiated NAFTA, which removed tariffs and other barriers to trade. The agreement makes trade between the three nations of North America mega-easy and is intended to generate trillions of dollars of revenue every year.

A Performance Fee is…

Thursday, July 21st, 2011

A performance fee is an additional payment based on success. For example, a hedge fund manager might receive a performance fee (like a bonus) based on the profitability of his fund. Ideally, the promise of this fee will encourage the manager to make the best possible investments.

Core Inflation is…

Thursday, June 30th, 2011

Core inflation = full (a.k.a. headline) inflation minus inflation in energy and food prices. It’s the number that monetary policy makers (like the Fed) look at when they are monitoring inflation.

Why would they ignore inflation in the two things that we all spend so much money on? The answer is that food and energy prices change all the time, in unpredictable ways. A war in the Middle East can cause oil prices to spike. A drought in the Midwest can devastate crops – reducing supply and increasing prices. But the Fed believes these are temporary events and temporary price changes. So they just ignore food and energy, and focus on the more lasting price changes of other things.

Capitalism is…

Thursday, June 30th, 2011

Capitalism is an economic system based on profit and private property. Through free exchange, people and companies are able to trade goods pretty much as they please. In a capitalistic marketplace, nearly everything is privately owned by profit-seeking entities rather than a government (such as with socialism). Capitalism is practiced in the United States and many other countries.

Chapter 7? Chapter 11? What kind of book is this?

Friday, June 3rd, 2011

Lately, the economy’s troubles have people talking about Chapter 7 and Chapter 11 so often that you might think they’re part of a new bestseller. In fact, Chapter 7 and Chapter 11 are two different chapters of the U.S. Bankruptcy code. They explain two different ways you can file for bankruptcy.

If a company files for bankruptcy under Chapter 11 – “rehabilitation bankruptcy” – it tries to make some changes and then get running again. Basically, the company can’t ignore the money it owes creditors, but it can do things like negotiate a lower interest rate, making it easier to try to pay the money back. If it’s successful in Chapter 11, the company can keep working like usual.

But if there’s is no hope for a company to fix itself, it files for bankruptcy under Chapter 7 – “liquidation bankruptcy” – and the entire company is, well, liquidated, meaning that it is broken up into pieces and sold. A company that files for Chapter 7  is in such bad shape that they can’t do anything but sell their assets. The people who lent the bank money then wait in line to collect debts, based on when they loaned their money to the company in the first place.

From the business owner’s point of view, bankruptcy is a kind of chapter in a scary novel. (But hopefully not the final chapter.)

A Layoff is…

Friday, June 3rd, 2011

A layoff is when an employee is either temporarily suspended or permanently fired from a job. Layoffs aren’t usually about employee performance, but rather a consequence of a company experiencing a financial crisis. The company may need to downsize, resulting in the elimination of certain jobs, in order to cut costs.

Precious Metals are…

Friday, June 3rd, 2011

Precious metals are metals that are rare and valuable. For example, gold, platinum, and silver are all precious metals.

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