The Correlation Between Interest Rates and Inflation Explained

April 9, 2012 By

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During times of inflation, you can count on fluctuations of interest rates, which occur to help manage the spending levels of individuals in that particular economy. In the United States, interest rates are managed and determined by the Federal Reserve.

To help the Federal Reserve determine target interest rates, numbers from the Consumer Price Index (CPI), which are also used in calculating inflation, are taken into account. The Federal Reserve then alters interest rates to either increase the spending levels of consumers, or make it more difficult for consumers to borrow money.

Here is an explanation for the correlation between interest rates and inflation. You can also refer to a variety of sources on the web that illustrate currency rates and inflation.

Demand-Pull Theory

The "demand-pull" concept behind inflation is used to describe a period in which more money is being spent on consumer goods and services than is usual in an economy.

  1. Low interest rates are a major contributing factor to inflation, mainly because low interest rates allow a higher number of people to borrow money. Those individuals then spend their borrowed money on goods such as automobiles and homes, and other types of services.
  2. The higher spending amounts then contribute to a higher demand of supplies and goods. If manufacturers do not have the ability to keep up with producing a high amount of goods based on demand, the prices of limited goods will dramatically increase, resulting in inflation.

Cost-Push Theory

The "cost-push" theory in regards to the rise of inflation is normally due to increased production costs put in place by manufacturers and companies.

  1. When certain goods and services are in demand by consumers, manufacturers are often required to increase costs to support the high demand. For example, if more workers are needed to help manufacture and distribute goods, costs will increase as a result of having to pay wages to more workers.
  2. Banks will increase interest rates to help slow down consumer spending and economic growth. Higher interest rates will then make it more difficult for some individuals to borrow and spend money on specific goods and services. This practice allows manufacturers to produce more goods under a lower demand for product.

Interest rates are typically regulated and balanced by the government and other responsible entities to cause no more than two to three percent of inflation in an economy during any given year. You can review a visual presentation of Currency Rates and Inflation over a period of time to see exactly how interest rates are affected by inflation.

Do you take advantage of low interest rates? If so, what types of consumer goods and services do you spend your money on? Share your thoughts and tips with us in the comments section below this article.

Filed Under: Economic Development

The 8 Common Foreign Exchange Trading Terms

April 4, 2012 By

In Foreign Exchange (Forex) trading, there is a glossary of terms that are specific to those in the trade.

There are dozens of words to master. But if you want to get into Forex or just want to sound like an expert, here are the top 8 Forex Trading Terms.

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  1. Forex – The foreign exchange market. Countries, international banks, and even individuals are in the business of buying and selling currency. Like any business the goal is to buy low and sell high.
  2. Currency Pair – It means any two forms of currency being traded for one another. American dollars for British pounds, Australian dollars for Canadian dollars and  more. As long as there is a market, any two countries’’ money can be used as a currency pair.
  3. Spread – The spread is the variance between the buying price of a currency and the selling price. If the selling price is higher than what you bought it for, that is a positive spread and means a profit. If it’s the opposite it means a loss.
  4. PIP or Percentage in Point – the Pip represents the smallest number in the change of a currency exchange rate. In most currencies it is the fourth digit to the right of the decimal for example if the rate of exchange is 1.248 the number 8 is the pip. It may not sound like much but if you raise the pip 10 points on a deal that you sold 100,000 units, then the pip will net you thousands of dollars in profit.
  5. Leverage – (sometimes referred to as Gearing or Solvency) is a technique of multiplying the amount of money by using credit. It allows a trader to make (or lose) more money than they actually have on hand.
  6. Margins – This is the type of credit used to create leverage. The margins are what traders get from credit brokers. A high margin allows a trader to use $50,000 real dollars to make deals for higher amounts such as $500,000. This can lead to big gains and huge losses. Also since a margin is borrowed money, it can be canceled and called in any time.
  7. Stop Loss – This is kind of an emergency brake in Forex trading that prevents a loss from growing out of control. On the other hand it can also prevent a profit from growing exponentially as well. There are two kinds: A regular stop loss that locks in a specific value of the trade or a trailing stop loss that rises as the profit increased but prevent the trader from losing too much of the profit if the market changes quickly.
  8. Long vs. Short – This is the amount of time a trader keeps a currency without trading it. A short duration can be as short as a few seconds or minutes and the long end can go for weeks or months.

Do some research if you plan to enter Forex. You might be in for a great money-making opportunity.

Filed Under: Business

How Can the US Dollar Decline Affect Your Business?

March 21, 2012 By
The United States one dollar note, like all ot...

The United States one dollar note, like all other American dollar bills, is historically green. (Photo credit: Wikipedia)

Most people are aware that the American dollar has lost its once high value. However, what they may not know is that this has affected all types of business. Confused as to why your enterprise is taking a toll from today’s economy? There are several reasons as to why this is happening, and this declining U.S. dollar can affect your business.

High Interest Rate

Businesses survive off of consumers in order to make a profit. For example, you may feel the pinch of the high interest rates if your company develops products such as homes or cars. The interest is so high; people have slowed their purchases in new homes, upgrades for current homes and new cars.

If you have noticed, it is the reason that people currently purchase used cars and have moved in with family members. This is also the reason these businesses declined during the beginning of the recession. Not only did it prove to be the Demise of the American Dollar, but it also became the downfall of many blue collar jobs.

Cost of Goods

In order for businesses that sell products to continue, they have to use raw materials. Pretend that your company runs a gasoline company. The cost of oil has increased over the last several years. Not only the cost of the oil, but the transportation that carries the oil is shouldered by the company. All these costs add up against an enterprise, which in turn has to increase prices to cover the costs.

Inflation

You may have heard the term inflation. If you haven’t, you probably have seen it in action yet not noticed it. This is seen in nearly every company during an economic crisis. Groceries, personal items and entertainment have increased due to inflation. Take candy bars as an example. Look at your favorite chocolate bar. Do you notice anything different about them? Most brand name chocolate bars are still the same length, but they are now much thinner. This is because the cost of raw goods is higher. Therefore, they can’t afford to sell a candy bar at its previous thickness.

When inflation takes place, that product or service cannot be purchased at its previous price. As you can see, there are many ways the declining dollar can affect businesses. However, with a majority of businesses, the most they can do is change along with the changing economy in order to survive.

Filed Under: Business, Economic Development

Entrepreneur Alert: How Secure is Your Email Fax Service?

March 16, 2012 By

Sending faxes through email is easy, cost-effective, and great for the environment. However, it’s important to take security precautions to protect your email. Anything transmitted over the internet is vulnerable to viruses and cyber attacks. Protect your e-mail by employing these added security measures.

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Encrypt Your Email to Provide Added Security

Explore security services immediately before signing up with an online faxing service. Take the email fax services by Metrofax as an example. It allows you to encrypt your email using Simple Mail Transfer Protocol (SMPT). SMPT is specifically used for outgoing messages and protects your email as it travels across Internet Protocol (IP) networks. Once a fax becomes encrypted, it can only be viewed by entering the proper password. Indeed, only the e-mail sender has control over creating and changing the password attached to your account.

Enabling Your Email Encryption

It’s just as important to protect your incoming faxes as it is to encrypt those you send. In fact, your service provider will intercept and encrypt your incoming messages before they reach your inbox. Unfortunately, it’s impossible to encrypt an online fax sent by an unknown party. But with email services by Metrofax, they can at least encrypt the message from the time it reaches their servers until it gets into your inbox. Before signing up with an email fax service, explore rates for email encryption to cut the chances of dealing with hidden fees.

Send Email Faxes Using a Public Key Signature

A public key signature is an extra measure of protection for your online faxes. Unlike password protection, where the user must enter a password each time they view a fax, a public key signature is a one-time thing. Send an email to your service provider with the email address that you will be using to send and receive faxes. Your service provider will then associate the sender address with this digital signature providing more security for your inbox faxes. As a result, any confirmation returned to this address will automatically be encrypted from then on.

A public key signature allows your email fax service provider to protect you while you focus on the important aspects of your business. Viruses, cyber attacks, malware, and other compromising agents will end when you take this one simple security step.

Conclusion

Securing your fax services provides you with peace of mind. In addition, your clients, patients, customers, and anyone else who receives faxes from you will know the message is secured. Remember to stay on top of your inbox so you become alert when it comes to receiving unexpected fax messages. Explore notification options available from your service provider. For example, you can receive alerts directly to your e-mail, cell phone, or other devices when someone sends you a message.

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How is Natural Gas Efficient to Small Scale Industries?

March 6, 2012 By

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Of all the options we have for powering our businesses, none is more efficient and affordable than natural gas. Though the price of foreign oil has climbed in the struggling economy, natural gas remains competitively priced. Not only is natural gas affordable, but it’s also an environmentally friendly energy source.

Where Does This Natural Gas Come From?

There are many reserves of natural gas snuggled in shale across the country. One of the largest deposits lies beneath much of the southeast United States. This formation is commonly referred to as the Eagle Ford Shale. These underground reserves of aged marine shale have the potential to provide a natural alternative to our dependency of foreign oil. Much of this shale being utilized by the country is currently being drilled in southern Texas.

Why is Natural Gas More Efficient?

Lowest Loss in Collection and Distribution

When energy sources such as oil are extracted and distributed, the loss is tremendous. The substantial loss is due to the actual energy required to drill just to access these resources. It is estimated that less than 30 percent of the oil that is dilled actually reaches consumers. However by utilizing the natural resources here on American soil, A full 93 percent of the natural gas extracted reaches the businesses in the form of usable energy. Many politicians believe that tapping into U.S. reserves of shale gas is the answer to our energy crisis, and for good reasons.

Natural Gas: An American Resource

Another selling point for American businesses is using goods and services “Made in the USA.” In fact, many consumers won’t buy if they believe their hard-earned dollars are going elsewhere. The United States has an astounding amount of natural gas, and new procedures for extracting shale gas have made the process simpler, quicker, and safer for the workers as well as the environment.
When businesses can say that their energy source is both environmentally sound and locally produced, they have a tremendous selling point.

How Does Natural Gas Help Small-Scale Industries?

Small industries must constantly reduce operating costs, increase efficiency, and produce good selling points for their products in order to remain competitive. Many small industries have discovered that natural gas is the obvious solution for their energy needs. And their customers are happy because these small industries are doing a responsible thing by supporting local goods and by keeping the environment healthy and viable.
If your small-scale industry is seeking ways to cut costs, to be more efficient, and to contribute to environmental efforts, natural gas is what you should consider. Aside from affordability, you’re helping the environment as well as American workers who need jobs now more than before.

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Four Steps to Becoming a Better Landlord

March 5, 2012 By

Whether you are brand new landlord, or one that has many years of experience, you probably know that this position is more than just collecting those rent checks each month.

When you choose your rental property, make sure that you understand all the ins and outs of that property. Make sure that you can afford the mortgage payments. You will need to examine other rental rates in the same area for comparison numbers, whether it is for San Antonio apartments or New York City rentals. You should also make sure to include money in your budge for any needed expenses such as maintenance and possible renovations.

Additionally, here are four great tips to help you become a great landlord, whether you are just starting out or not.

Understand the Regulations

Consult local housing authorities and regulators to ensure that you understand the tenant-landlord rules and regulations that govern your particular area. You can also consult a real estate attorney to get that information.

Along with tenant-landlord regulations, you should make sure you are familiar with the area’s building and housing codes. This kind of information can include how many occupants are allowed to dwell within a certain size home, as well as other safety and health rules.

Make sure that you have leases in place. You can use standard leases available at most office supply retailers, or you can have one written by an attorney, depending on your individual situation. Leases are important because they outline the responsibilities and expectations of both the landlord and the tenant. Make sure that your tenants have received a properly signed copy of the lease.

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Properly Maintain a Safe Property

Make sure that your property is properly maintained. You want to make sure that all appliances are in good condition and functioning properly. Plumbing, electrical and heating systems are some of the most important items to keep maintained.

Additionally, make sure that all the necessary actions are taken for providing a safe and sanitary living condition for your tenants. This can include making sure that trash removal services are provided. Make sure that your units have locks, proper lighting and other security features.

Tenant Privacy

While you may need to enter or access a tenant’s unit from time to time, you should provide adequate notice before entering. This will not only maintain a good relationship with your tenants, but in some areas it is a requirement of the law.

Collecting Rents

Make sure that you properly collect and record rental payments. Having proper records of payments received will ensure that no payments are missed.

Being a good landlord will be easier when you follow these simple tips, and you and your tenants can enjoy a good relationship.

Filed Under: Personal Development Tagged With: , ,

What Employers Should Know

February 5, 2012 By

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Becoming an employer can seem complicated. You are not only in charge for keeping the business functioning and making sure clients are happy, but also with hiring workers, creating schedules, payroll and dealing with personal circumstances. Each area can seem full of information that you need to know – and plenty of consultants who will explain them to you.

Americans with Disabilities Act

This act aims to prevent businesses from discriminating against otherwise capable employees who have a disability. For companies with 15 employees or more, you cannot discriminate during hiring, firing, promotions, compensation or training. While the wording can seem difficult, the act referring to “Qualified Individuals” is relatively easy to understand. A person is deemed disabled if they have an established or recorded physical or mental impairment which limits one or more life activities.

The employee becomes a qualified individual if they can perform the essential duties of a job with or without reasonable adjustments. It is also worth noting that alcohol and drugs are not covered under the act, and employers may terminate the employment of employees using these drugs if the company policy allows it.

If you have a qualified individual working for you, then you need to work out what a reasonable adjustment is. This includes making the office accessible, job restructuring, schedule modification, buying or modifying equipment or training, changing policies or providing a qualified interpreter or reader. However, if any change would pose an undue burden or hardship on the business, it does not need to be made.

Employee Vs Independent Contractor

The difference between an employee and an independent contractor is one which every employer should know. If you employ an employee, you are responsible for paying Social Security, Medicare and unemployment insurance, along with other possible costs such as workers compensation insurance.

The Internal Revenue Service offers guidance on how to distinguish between the two categories, to ensure you are following procedure. Firstly, consider behavioral points. Do you control how the worker does their job, and what they do? If so, they are likely to be an employee. Second, look at the financial angle. Did you specify how you would pay the worker, and whether reimbursements would be made? Do you provide any tools or supplies to do the job with? You are also likely to have an employee if you offer benefits such as a pension plan, vacation pay or insurance.

If you still aren’t sure whether you have employed an employee or an independent contractor, you should seek legal advice. Find a local company, such as Workers Comp Attorneys in Massachusetts, who will know all about the legal aspects in your state. Seeking help could save you plenty of money in the long run.

 

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What Is an Online Trading Broker?

January 25, 2012 By

The world of trading and brokering can be a complex one to understand. The range of terms and fast-paced style of the trading floor can leave people feeling confused and unsure of what exactly happens on the trading floor. One of the main figures in the world of online trading is an online trading broker. This article will look at the tasks someone in this occupation undertakes.

 

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What is an Online Trading Broker?

An online trading broker is essentially someone who trades large amounts of a good or product online. These can be anything from everyday household items to shares in large businesses. Online trading brokers can even trade units of currency, with the eventual aim being to purchase goods at a low price and then sell them later for a profit.

How Much Does a Broker Cost?

Different online brokers have different rates, but whichever one you choose, you will most likely have to pay a deposit on their services. You will also have to pay a commission to the broker to get him or her to trade for you. This is a core area of how the broker makes money, so make sure you don’t mind giving up some of your profits. There may also be certain hidden fees involved with the use of a broker, so make sure you don’t get a nasty surprise when its is time to pay them!

Will I be Able to Understand Them?

When trading, brokers need to speak a specific language to communicate their desires quickly and efficiently to other traders. If you don’t know what the terms leverage, currency pair or long vs. short mean, you should do some research to familiarize yourself with the broker’s world. You can check out a basic Forex trading terms glossary by UFX Markets for more information.

Full-Service or Discount?

These are two different types of brokers, and each comes with their own advantages. Full-service brokers will be able to handle all of your brokering needs, although these extra services come at a cost. On the other hand, discount brokers will save you a lot of money, although they will also expect you to do a lot of the work yourself. Think about your level of experience in the brokering field to dictate the type of broker you select.

Now that you know some basics about online trading brokers, do some research and select the one that is right for you!

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Understanding Chapter 7 Test

January 22, 2012 By

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There’s a lot that goes into filing for Chapter 7 bankruptcy. It’s recommended to know the entire process before filing. Part of the filing for bankruptcy process is taking the bankruptcy means test. Understanding the Chapter 7 test is going to make the entire process less frustrating.

Law requires that anyone filing for Chapter 7 bankruptcy must take the Chapter 7 means test. The test is going to figure if your income is below, equal or above the median income in your state. If your income is above the median then you’ll need to file Chapter 13, which doesn’t completely eliminate your debt but creates a plan that allows you to pay off your debt during a certain amount of time.

Here is important information to understanding the Chapter 7 means test.

Using the Internet

You won’t have a difficult time finding the Chapter 7 means test online. Keep in mind that some websites might charge a fee to view the test and others do not. Click the free means test calculator where you’ll then enter the required information. Each state has different bankruptcy laws so it’s important to follow what your state requires

Means Test Calculator

The Means test calculator is going to figure out if you need to take the real means test. Expect questions about how may people are in your household and how much your monthly income average during the past six months. Exceeding the median income means you’ll have to take the test. The test will give you the chance to list your expenses, which will then decide if you eligible to file for Chapter 7 bankruptcy.

Breaking Down the Test

The ch 7 means tests broken down into different sub categories. Each group will allow you to list all your expenses that the IRS allows. This will confirm whether you can file Chapter 7 bankruptcy. Expenses you’re allowed to list include: food, household supplies, car expenses and utilities. After the deductions are given, the final decision will get made. The amount that determines who qualifies for bankruptcy will vary from state to state.

Understanding Chapter 7 Test is essential when filing for Chapter 7 is the right step for them. Those who don’t qualify end up qualifying for Chapter 13, which won’t take care of your debt for you but it will help create a realistic plan to get your out of debt. The important bit of information people need to consider is that whether your filing for Chapter 7 or 13, it will stay on your credit for up to 10 years and could affect purchases you may want to make in the near future.

Filed Under: Legal Tagged With: , ,

Forget the Initial Savings: Offshore Outsourcing is a Long-Term Investment

June 9, 2011 By
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Offshore outsourcing stemmed from a logical idea: if our company can hire offshore workers to do the same work for a fraction of the cost, why wouldn’t we outsource? How can we afford not to? Unfortunately, most companies see a bottom-line price and expect to start saving money right away. Outsourcing is a long-term investment, not a short one. Here are some of the expensive initial costs you’ll encounter:

  1. Severance Packages.
    Severance packages aren’t the only layoff expense you’ll encounter: you’ll need to keep plenty of employees on hand until the transitional period is complete. If you don’t offer retention bonuses as an incentive for employees to stay, they’ll leave the company at the first sign of a new job.
  2. Advisor and Legal Fees.
    Selecting an outsourcing vendor is a costly and lengthy process. You’ll need to draw up a contract and hire outsiders to make sure it holds water. Look out for any hidden expenses that aren’t included in the contract.
  3. Travel Expenses.
    You’ll need to travel overseas to see your new outsourced department. You’ll want to make sure it’s up to your company’s standards…and seeing operations in action will make it much easier to manage later.
  4. Low Productivity.
    Your company’s productivity will take a definitive nosedive. Employees have new job descriptions, you’re faced with a language barrier, and you’re working with people across several time zones. If a mistake happens, it’s going to take a lot longer to fix.

Offshore outsourcing may save you money in the long run, but it’s a costly investment filled with headaches initially. Be sure you do the math before signing the contract.

Filed Under: Business, Outsourcing Tagged With: , ,
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