WHY DOES A STOCK GO DOWN IN PRICE WHEN THERE IS A BIG SELL OFF?

SUBMITTED BY: SONIA KATOCH

CLASS: MBA- I (B)

The stock market can be compared to a massive auction, wherein ownership of large companies is for sale. The investors involved have varied points of view. While some investors may gauge a particular company as viable investment and are willing to bid the price up; there are others who wish to sell off. Such constant variations lead to the fluctuations in stock prices. Stocks go up when more people want to buy than sell. When this happens, investors begin to bid higher prices than the stock has been currently trading. On the other side, stocks go down because more people want to sell than buy. In order to quickly sell their shares, people are willing to accept a lower price.

The number of shares sold of a particular stock on a given day has to equal the number of shares purchased of that stock on that day. On the stock market, this is referred to as the "volume". Under certain circumstances, the stocks at a given point of time become unattractive to both the new buyer and to the existing owner. The reasons for a company losing its charm could be many. Stocks could go down due to slipping of profits, resignation of top executives, a good investor selling off a big chunk of shares, losing a valuable customer, a factory burn down, similar stocks going down in the market, an analyst downgrading the stocks, launching of a better product, shortage of product supply, scientists rating the product as unsafe, a law suit filed against the company, lack of popularity of the company and even rumors misguiding investors in general.

Due to any of the reasons mentioned, the stock of a company could suffer in value. As a result, shares in that company at the current price are now less attractive to both, the current company shareholders and those considering purchasing shares of the company in question. In such eventuality, those interested in buying the stock will tend to demand a lower price to accept the company's shares. This means that the bidding price of the stock gets lowered. On the other hand, those interested in selling the shares of the same company will offer a lower price to lure people and get rid of the shares. This obviously lowers the asking price of the companies stock. Eventually a buyer and seller will agree on a price, which equates the 'bid' and the 'ask' and the shares will be sold. This price will naturally be lower than the price at which the shares were previously selling and therefore, the stocks go down in price despite a big sell off.

The relationship between the number of goods sold and the number of goods bought holds good in any market, not just the stock market. The rates in a stock market go up and down similar to the action of a bouncing ball. Some investors are tuned to these fluctuations in the stock market but it can be extremely frustrating for many investors who desire a steady rise. However, despite the volatility in the market as a whole and in the individual stocks, an experienced trader will make profit. In the absence of experience, the individual investor needs a proven source of information and direction.

Therefore, it is advisable to closely look into the companies financial statements and assess its worth before making the investment. One can also study the stocks' past performance, which would surely indicate the trends in future. In fact such fluctuations have made many investors into traders, who buy and sell on the fluctuations of the market and the individual stocks. These traders make money in any market - up or down!

why some countries are rich and some are poor

Why Some Countries Are Rich And Some Are Poor?


Reasons why some Nations are Rich


Wealth in the world is not equally distributed. Some nations are very rich whereas others are very poor. The Western nations such as the US, West Germany, UK are very prosperous. On the other hand, economically poor countries such as those in the African continent and India, Pakistan are lagging behind. Why is this disparity so? Many economists have tried to answer this question and have suggested solutions to it, but yet it persists.
The question that arises is that why some nations enjoy a higher level of prosperity? Why do they have a higher per capita income? Let us observe this phenomenon.




Why nations are prosperous?
• Higher industrial productivity.
• Technical know-how.
• Less population.
• Efficient labor who are hardworking and committed to their work.
• Better utilization of natural resources.
• Higher education levels.
• Active participation of citizens in improving their lot. Questions are raised in Parliament in case the Government does not deliver.
• Stable Governments in power.
• Less outside interference. Many Eastern and African nations have been subjecte
• Effective laws.
GOVERNMENT ATTITUDE TOWARDS ECONOMIC DEVELOPMENT
In the rich nations, the elected governments owe a lot to their citizens and try their best to please them. They are in power on account of them and cannot afford to neglect them. In the less developed countries, the Government once they come to power, forget the needs of the people and are busy sorting out their vested interests. Corruption is higher in these countries and the people do not enjoy all the benefits of prosperity. Only a few do.
The governments in the developed countries are questioned in case they do not meet up to the expectations of the people. Naturally, they would ensure that economic development is at a higher pace so that people can enjoy better standards of living.
The US economy, for example, is a highly developed economy. The elected government takes its work of providing the people with all the luxuries and comforts of life.
Therefore, the countries which have a higher per capita income have streamlined administration and governments that run the country well in order to promote people’s well-being.

Why some countries are poor

Most rich countries are in the North of the globe, and most poor countries are in the South, but it’s not geography that causes wealth or poverty. After all, Australia and New Zealand are part of the Southern hemisphere, and both are doing fine. You couldn’t say this of Papua New Guinea, which is the Asian country closest to Australia and New Zealand.
A superficial view is to blame racial differences. Black Africa is the poorest and most disordered part of the world, and Haiti, with an almost entirely black population, is the poorest country of the Americas. But the coincidence is accidental.
What makes some countries rich, and others prone to poverty is not related to skin color or racial factors. Many immigrants from poor nations do very well in the US and Canada (though one has to admit that both countries are likely to make immigration easy only for the best and the brightest of those who hail from Third World countries).
NATURAL RESOURCES
It is also not the presence or lack of natural resources what makes a country rich or poor in the long run. Japan is a country with very limited natural resources, and it has been the richest country in Asia for a long time. On the other hand, it is easy to predict that some Third World countries that currently are rich because of immense reserves of natural wealth while not being burdened with large populations, will slide back when the natural resources are depleted.



MANY CAUSES
But why are the people of some countries doing well, in spite of the destruction brought by lost wars, and in spite of the lack of natural resources, or an unfavorable climate?
It’s wrong to search for just one answer. There are many aspects that determine how well, or haw badly, a country will fare economically.
Some aspects relate to the attitudes of people (and the roots of such attitudes can date back many generations). Other aspects are just of a matter of the political system (think North and South Korea). And I assume that in the coming world, with an ever higher degree of globalization, providing a favorable political and social environment will become ever more relevant.
Educational systems certainly play a role. Richer countries typically have better educational systems, and the discrepancy normally reaches back more than just a generation or two.
THE COMMON GOOD
One aspect that determines the likelihood of economic success in a given society is the emphasis, or lack of emphasis, that is put, psychologically and philosophically, on the common good. This emphasis can be measured by the degree to which, emotionally or consciously, people agree that a common good justifies restrictions on the individual, including oneself. It could also be described as the degree to which the members of a society are willing to forego individual advantages if thereby a larger advantage is secured for the community.
OVER-EMPHASIZING THE COMMON GOOD
I have indicated above that societies are all the more likely to prosper the more its members are willing to emphasize the common good over individual advantage, even to the point of self-sacrifice, which, from the perspective of self-cognition, is wrong.
Unfortunately, Christianity and Islam have both heavily benefited from the willingness of its disciples to give their lives for the ideals of their religions.
However, just as a genetic trait doesn’t become philosophically true because it procreates itself, a philosophical idea doesn’t become any more sensible because it gives its followers the strength to out-compete those who have other philosophical ideas.
Once we have achieved enough self-cognition, we are aware of our individual death, upon which we cease to exist for all eternity. Thus we realize that the only sensible individual values are optimal sexual experience, and after that, a gentle death.




o Rich and Poor Nations Why?
There are a number of reasons why some nations in the world are much more wealthier and dominant in the world and a number of reasons why some are so poor and weak. Also, there are many nations that are full of natural resources that have the potential to become wealthy and fail to do so. For decades there has been much debate on actual causes and also theories. In the 18th century people believed that societies living in places that were really hot were lazy. Today, people still say climate and geography play a role. (Deeran 2009)
Others feel that if poor countries can create better institutions and improve their government, (change), then things could get better. Some feel that richer countries need to reach out to the poorer countries more by offering assistance such as technological and educational. Digging deeper, you may wonder why some nations settle for warlords running their country. It doesn’t all come down to education. If you ask me, I think it has more to do with politics. (Deeran 2009).
It might even be safe to say that religion plays a role in the reason why some nations are poorer than others. There have always been societies that solely follow their religious beliefs in regards to how they live. Some nations consider themselves living the basic simple life by choosing not to fall into the gap of consumerism. They live a very nonchalant lives and are content to do so. Those nations that choose this way of life also don’t consider themselves poor.
There are however, a number of places such as Africa and India that have and continue to suffer dearly. There are many places in Africa such as the Congo, Niger, and Ethiopia that are in constant turmoil. This however is largely due to politics and renegades as well as guerillas, not to mention the sexual violence that runs rampant. (Karmaker 2009)
Take a look at countries that are resource rich yet still poor. Take a look at Nigeria. They are viewed as the sixth largest producer of crude oil in the world and can provide up to 3 million Barrel per Day which in turn adds up to a lot of money. Nigeria is viewed as being on the wrong side of human development. They are forever ranked the lowest when it comes to educational, sanitation, capacity building, health and so on. Countries like this deal with corruption, taxation, revenue volatility and more.
All in all, in my personal opinion, some countries are rich and some are poor because of society itself or members within that society in each country. In North America, history tells how America grew and the same for Europe. A lot of it had to do with politics and society. I’m not one to agree with blaming it on the weather. I think society knows who to blame many of the times.

Top 5 richest countries of the world
1. Luxembourg – $80,800

This tiny country with a total population of less than 500 000 is a true European miracle. By tiny we mean the 8 smallest country in the world. From top to bottom it’s only about 50 miles and at its widest about 30 miles.
2. Qatar – $75,900

This Arabic speaking country has less than million people and gained independence from Great Britain only in 1971. Qatar used to be a poor Islamic country but since the discovery of oil and natural gas in the 1940s, it is completely transformed. With no income tax it is one of the least taxed countries in the world, while still offering most of its services to the population for free.
3. Norway – $55,600

Norway is one of the few highly developed countries in Europe tthat are not part of the European
Union. This oil and natural gas rich country has living costs more than 30% higher than in the
United States. In 2006 only Russia an



4. Kuwait – $55,300

In Arabic Kuwait translates to “Fortress built near water”. In addition to being on the coast of the Persian Gulf this country has well known neighbors like Saudi Arabia and Iraq. Kuwait has the worlds fifth largest proven oil reserves – about 10% of the worlds total. Being a country without taxes, about 80% of the governments revenue comes from exporting oil. Having the the second-most free economy in the Middle East, Kuwait has one of the fastest growing economies in the region.
5. United Arab Emirates – $55,200

o This oil and natural gas rich country has a highly developed economy which makes it one of the most developed in the world. Having more money than they know what to do with, they have built numerous artificial islands and just finished building the worlds highest structure – Burj Khalifa. It is 828 meters tall, being about 2 times as high as the Empire State Building in New York. It is estimated that about 1/4th of the total construction going on in the world is taking place in





o Top 5 richest countries of the world
01. Republic of the Congo (GDP – per capita: $300)
02. Republic of Liberia (GDP – per capita: $500)
03. Republic of Zimbabwe (GDP – per capita: $500)
04. The Solomon Islands (GDP – per capita: $600)
05. Republic of Somalia (GDP – per capita: $600)

o Conclusion
At the end I can say that to be a rich there are always some hurdels like illiteracy, population growth, no availability of good manpower and many others. Today the countries that are rich they had overcome them. But the poor countries are still fighting with them. Rich countries not really help them in development, but they needs help.

Name Nishant Mahajan
MBA 1st B

Stability and Growth in Industrial Economies
Industry: An industry or sector is the manufacturing of a good or service within a category. The word 'industry' comes from the Latin 'ndustrius' meaning "diligent, industrious".

There are three key sectors of industry:
the primary sector, largely raw material extraction industries such as mining and farming;
the secondary sector, involving refining and manufacturing;
and
the tertiary sector, which deals with services (banking, transportation etc) and distribution of manufactured goods.
Both Internal and External Environmental Factors affect the Stability and Growth of an Industry of a particular firm
1 . Internal Environmental Factors, these involve [5M]
• Management
• Manpower
• machine
• material and
• money.
2 . External Environmental Factors:
External Environmental Factors are sub-divided into Micro (Operating) and Macro (General) Environmental Factors.

Micro Environmental Factors:

1.Suppliers - the quality of Raw material and inputs supplied plays vital role with the amount of consistency they are supplied.

2. Customer - the bargaining power of customer in the form of Quantity demanded and level of income plays a vital role.

3. Market Intermediaries (wholesalers, Retailors)– the profit margin of wholesaler & retailor with their capacity of occupied marker share

Macro Environmental Factors:
P = Political Factors
E = Economic Factors
S = Social Factors
T = Technological Factors
E = Environmental Factors
L = Legal Factors

• Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation.
• Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy
• Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers).
• Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.
• Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.
• Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.
By using the PESTEL framework we can analyze the many different factors in a firm's macro environment.
However, it is important not to just list PESTEL factors because this does not in itself tell about situation very much. What we need to do is to think about which factors are most likely to change and which ones will have the greatest impact on them i.e. each firm must identify the key factors in their own environment so they can maintain certain level of growth and stability essential for their profitability and survival.

Multilateral Agreement on Investment

Introduction:-Multilateral Agreement on Investment (MAI) was a draft agreement negotiated between members of the organisation for Economic Co-operation and Development(OECD) in 1995–1998. Its ostensible purpose was to develop multilateral rules that would ensure international investment was governed in a more systematic and uniform way between states. When its draft became public in 1997, it drew widespread criticism from civil society groups and developing countries, particularly over the possibility that the agreement would make it difficult to regulate foreign investors. After an intense global campaign was waged against the MAI by the treaty's critics, the host nation France announced in October 1998 that it would not support the agreement, effectively preventing its adoption due to the OECD’s consensus procedures
Purposes and provisions
While authorizing the negotiations, the OECD Ministerial Council aimed to reach a "broad multilateral framework for international investment with high standards for the liberalization of investment regimes and investment protection and with effective dispute-settlement procedures". The aim was to create more consistent, secure and stable investment conditions and to regulate investment in a more uniform, transparent and enforceable manner. Although the agreement was to be negotiated between the member states, the intention was to have an open-agreement which non-OECD members could accede on a negotiated basis.
One of the main purposes of the agreement was to eliminate the "patchwork" of investment rules enshrined in the then-1300+ bilateral investment treaties. Contrary to many critics, the MAI would help prevent "races to the bottom" that would undermine high standards of Canadian regulation. More specifically, the agreement would:
• Minimise the diverse state regulations in governing the conditions under which investments by foreign corporations could take place.
• Enable compensation to corporations for proven unfair or discriminatory investment conditions causing loss of profit.
• Allow states and corporations recourse to international arbitration to settle any disputes arising under the agreement, instead of national courts in the host state.

Conclusion
The MAI is aimed at setting up an international regime for protection and advancement of international investors' rights. But correspondingly the rights and authority of the host country's government will be either removed or severely restricted.
Moreover, the MAI would impose no obligations on the foreign investor to respect the sovereignty or social and development objectives of the host country. But the host country's government would have many new and heavy obligations towards the foreign investor.
The approach taken by MAI proponents is new in that it is an extreme approach as it covers and greatly expands the rights of international investors, whilst not recognising and thus greatly reducing the authority and rights of host governments and countries

TOPIC -

What is Inflation?

Submitted to -

Prof.Gurdeepak

Submitted by-

Name- Parul Malhotra

Class- MBA 1

Section- B

Subject- Accounts

INTRODUCTION

Innflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service.

In recent years, most developed countries have attempted to sustain an inflation rate of 2-3%.

CAUSES OF INFLATION

Demand-Pull Inflation - This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies.

Cost-Push Inflation - When companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.

MEASUREMENT OF INFLATION

Measuring inflation is a difficult problem for government statisticians. To do this, a number of goods that are representative of the economy are put together into what is referred to as a "market basket." The cost of this basket is then compared over time. This results in a price index, which is the cost of the market basket today as a percentage of the cost of that identical basket in the starting year.

We can also measure it by –

· Consumer Price Index (CPI) - A measure of price changes in consumer goods and services such as gasoline, food, clothing and automobiles. The CPI measures price change from the perspective of the purchaser. U.S. CPI data can be found at the Bureau of Labor Statistics.

· Producer Price Indexes (PPI) - A family of indexes that measure the average change over time in selling prices by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. U.S. PPI data can be found at the Bureau of Labor Statistics.

INFLATION RATE IN INDIA

The inflation rate in India was last reported at 8.62 percent in June of 2011. From 1969 until 2010, the average inflation rate in India was 7.99 percent reaching an historical high of 34.68 percent in September of 1974 and a record low of -11.31 percent in May of 1976. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy. This page includes: India Inflation Rate chart, historical data and news.

CONCLUSION

Inflation-indexed securities offer protection against inflation but offer low returns Inflation is a sustained increase in the general level of prices for goods and services.

Ø When inflation goes up, there is a decline in the purchasing power of money.

Ø Variations on inflation include deflation, hyperinflation and stagflation.

Ø Two theories as to the cause of inflation are demand-pull inflation and cost-push inflation.

Ø When there is unanticipated inflation, creditors lose, people on a fixed-income lose, "menu costs" go up, uncertainty reduces spending and exporters aren't as competitive.

Ø Lack of inflation (or deflation) is not necessarily a good thing.

Ø Inflation is measured with a price index.

Ø The two main groups of price indexes that measure inflation are the Consumer Price Index and the Producer Price Indexes.

Ø Interest rates are decided in the U.S. by the Federal Reserve. Inflation plays a large role in the Fed's decisions regarding interest rates.

Ø In the long term, stocks are good protection against inflation.

Ø Inflation is a serious problem for fixed income investors. It's important to understand the difference between nominal interest rates and real interest rates.

What is Financial Crisis?

ASSIGNMENT 1

ACCOUNTING FOR MANAGEMENT

Submitted To:

Mr. Gurdeepak Singh

Submitted By:

Pratibah Pathak

MBA-I^st

What is Financial Crisis?

It is a situation in which the supply of money is outpaced by the demand for money. This means that liquidity evaporates quickly because available money is withdrawn from banks (called a run), forcing banks either to sell other investments to make up for the shortfall or to collapse.
The global financial crisis of 2008-2009 emerged in September 2008 with the failure & merger of several large U.S.-based financial institutions such as investment banks, insurance firms, and mortgage banks consequent to the subprime mortgage crisis, and spread with the insolvency of additional companies, and of governments in Europe.

This leads to recession and declining stock market prices around the globe.

Investopedia Says:

A financial crisis can come as a result of institutions or assets being overvalued, and can be exacerbated by investor behaviour. A rapid string of sell offs can further result in lower asset prices or more savings withdrawals. If left unchecked, the crisis can cause the economy to go into a recession or depression.

What are the causes of Financial Crisis?

The financial crisis was caused by the sudden drop in home prices. Banks held mortgages on homes that people could no longer pay. Normally, the bank forecloses on the home and sells it for either profit or break-even. But this time, home values had fallen by as much as 40%. So banks lost 40% of their original investment when people started falling behind on mortgages payments and the banks were forced to foreclose.

This is easier to describe with numbers. Say a bank gives a family a mortgage for the total value of their home, say $100,000 (this is lower than most mortgages, but makes it easier to see what's going on). The home then loses 40% of its market value, becoming worth only $60,000. The family then falls behind on their mortgages payments and the bank has to foreclose. The bank can only recover that $60,000 and is out $40,000. Now imagine this happening millions of times.

Once you get into much more complex financial mechanisms, we find that banks packaged these loans as investments call CDOs (collateralize debt obligations) that they then sold to other banks or financial institutions. Sometimes they are called commercial paper. When the value of these assets plummeted, a lot of financial institutions lost a lot of money. Again, normally this really has no bearing. But some bad choices were made with a normally useful financial tool called leverage. One can leverage funds by (this is a simple description) using the cash you have on hand as a down payment on a loan and then taking that loan an investing it.

A great example of this is taking $100,000 and instead of buying just one house that you rent out to someone, you take out mortgages on 10 houses and use the $100,000 has a down payment. You now own ten houses that you can collect rent from.

How Financial Crisis can be prevented?

Ø The crisis is a lack of trust among banks. The first step would have to be a total transparency of large interbank loans, similar to stocks. Since banks don't like this, only government can order disclosure of essential loan data. Pouring money into the system does not solve the problem. There is enough liquidity; it is just not being used.

Ø Get liquidity back into the markets: Banks are still strapped for cash and we are starting to witness a decline in lending. This causes businesses to have to cut back. This is why we are now seeing an increasing unemployment rate.

Ø Consumer confidence: If people have a belief in future success they will invest their time, energy and capital in ways that will restore the economy to a growth path. Confidence has been undermined in many ways over the last two decades. One of the greatest problems has been the lack of investment in manufacturing in this country. The result has been a loss of what the politicians term "good jobs". So confidence in consumer should always be there.

Ø Tax cuts: Further reduce individual and corporate tax rates across the board and announce that there will be no tax increases for at least two years. Do this at both the Federal and state levels. This will increase the confidence of individuals and businesses will increase trade, investment, business growth, and hiring. As businesses and individuals all become more successful, even low tax rates applied to a higher volume of trade will actually bring in more income to governments, not less.

INFLATION A NEW BATTLE?COMMENT?

DEFINITION

According to Michael Hodges, “Inflation is the loss of constant purchasing value of the dollar,caused by an increase out of 'thin air' of the supply of money and debt creation by the financial system, with all debt marked-to-market value.”
“The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.”
In other words, “suddenly rising the prices of product or services,is called inflation.”
example 1: a postage stamp in the 1950s cost 3 cents; today's cost is 42 cents - 1,300% inflation;
example 2: monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $96.40 - 1,889% inflation; (and up 70% past 5 years)
example3: several generations ago a person worked 1.4 months per year to pay for government; he now works 5 months.
And in the past, one wage-earner families lived well and built savings with minimal debt, many paying off their home and college-educating children without loans.

ABOUT INFLATION
INFLATION is the gravest economic concern (A BATTLE TO FIGHT)which has gripped India into its jagged tentacles. Inflation can be defined as the rise in overall price level in the economy, i.e. rise in prices of all the goods and services. When prices rise, each rupee buys less goods and services than it had been before, consequently eroding the purchasing power of money. It is measured through inflation rate- the annualized percentage change in a general price index (Consumer Price Index and Wholesale Price Index) over time. INFLATION is the gravest economic concern (A BATTLE TO FIGHT)which has gripped India into its jagged tentacles. Inflation can be defined as the rise in overall price level in the economy, i.e. rise in prices of all the goods and services. When prices rise, each rupee buys less goods and services than it had been before, consequently eroding the purchasing power of money.

DISCUSSION

MONEY SUPPLY UP, UP AND AWAY
DRIVES INFLATION ALL THE WAY
link:-http://grandfather-economic-report.com
A warning - MONEY SUPPLY explosion
creating loss of purchasing power of each dollar, plus exploding debt
"Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply." Milton Friedman, Nobel Laureate in Economics.
As money supply exploded 3,000% - The dollar's purchasing power collapsed 85%,
- - as proven by this chart.
The left chart compares growth of the broad money supply M3 (red curve) with the the shrinking value of a dollar as determined by the cost of living index (cpi-all items) - blue curve.
The rising red curve shows growth of the money supply since 1959, the value of which is shown on the left axis in billions of dollars - from $302 billion in 1959 to $11.5 trillion in 2006. ( M3 data: economagic.com).
The declining blue curve (taken from the chart at the top of this page) represents the falling buying value of a 1950 dollar, per the right axis shrinking from a value of 83 cents in 1959 to 11.1 cents in 2008 - representing89% loss in purchasing power since 1959.

INFLATION RATES
Annual inflation, measured in the WPI (Wholesale Price Index), jumped to a 13-year high of 11.05 per cent in the week ending 7 June 2008 from 8.75 per cent in the preceding week. Inflation has been rising rapidly since January 2008 and the weekly rise in inflation in the week ending on 7 June 2008 was the highest in the current calendar year.
This steep rise in inflation came mainly on account of the sharp jump in prices in the fuel group. Inflation in the fuel more than doubled to 16.25 per cent from 7.86 per cent in the week ending 31 March 2008. This was the highest rate of inflation in the fuel prices ever since 17 March 2001. The government had partially passed on the burden of the rising international crude oil prices to the Indian consumer by hiking the prices of petrol, diesel and LPG (liquid petroleum gas) by Rs.5 per litre, Rs.3 per litre and Rs.50 per 14.2 kg cylinder, respectively, with effect from 5 June 2008.

The rising inflation is due to the rising oil prices in the global markets which have increased to 135 dollars per barrel. The global demand for the oil is also on an increase with growing countries like China and India consuming more and more oil and the already developed economies not reducing their fuel demand. Every time the our country goes through a price hike in crude oil, there is an economic and political crisis. This time around as well, the government is under great pressure from the public at large and opposition parties.

The R.B.I has increased repo rate i.e. the rate at which it lends money to commercial banks and also raised the cash reserve ratio as part of its defence mechanism. But this is not enough as the base of monetary policy in India is still very weak. Efforts should be made to appreciate rupee so as to reduce the cost of imports of crude oil and reduce inflation. Hiking the interest rate is another option which will reduce the purchasing power of people and thus inflation. But the R.B.I cannot hike the interest rate beyond a certain level as it will hinder the growth of infrastructure which is essential to support the growth of the economy.

According to Robert Prior-Wandesforde, chief Indian economist at HSBC in Singapore inflation figures are likely to remain in double digits for the next nine months and peak at 15 percent by the end of 2008. But according to Chief Economic Advisor to the Finance Ministry Arvind Virmani inflation will have a clear downward trend in October-December this year. Whether any of these predictions will come true or not is still to be seen.



Food inflation

Food Inflation
Pranab Mukherjee assured that the government will be able to contain surging inflation. He further said that within the food basket, the prices of items like vegetables including onion, fruits, milk, egg and meat are becoming dearer.Government is pressurized with the high food inflation which stood at 16.91 % in the year to Jan. 1. Inflation eased marginally from 18.3 % recorded in late December, which was the highest in more than a year.The various steps to combat inflation may include reduction of duties on milk power, banning exports of wheat products and taking more essential commodities out of the futures market.
After the Prime Minister’s consultations, the decision of the Agriculture Ministry to export five lakh tonnes of sugar was referred to an empowered group of ministers, headed by Mukherjee



HOW TO CONTROL INFLATION
ZERO INFLATION GOAL
The following chart's black plot line shows the inflation rate each year since 1952, as measured by the Consumer Price Index.The red curve represents govt.'s revised method, discussed below.

link:-http://grandfather-economic-report.com

The first thing to note in this chart is today's inflation rate is the highest in 16 years - and well above the 1952-1967 period. Why did media and government officials imply inflation is 'dead', saying its the 'lowest in our life time'? Many citizens were misled by such erroneous statements and their planning for the future suffered.
Look to the left end of the chart. For the period 1952-1965 the inflation rate averaged about 1% or less per year (the dashed red line). This low-inflation period produced strong inflation-adjusted family income growth. Therefore, we set the 1% level as our target - - noted by the dashed-red line on the chart. In the mid-1960's inflation rates began a dramatic rise, for the next 2 decades. Once inflation rates exceeded about 3% inflation-adjusted family incomes and savings rates ceased to grow, as seen in the Family Income Report - - just as today's incomes are not growing while family savings plummet. The Reagan Era of the early 1980's started excessive rates downward toward the 2% level. Since then, inflation rates were much higher than the 1% rate.
Computer price impact:-
Another item to keep in mind is the impact on the total CPI of rapidly declining computer prices. From 1987 to 1993 computer prices tracked the CPI, but then computer prices dropped much faster than did the over-all CPI. excluding the computer component of the CPI, the non-computer CPI in 1997 was higher than in 1993 - 40% higher.
Inflation works as long as the housewife thinks
“I need a new frying pan badly. But prices are too high today; I shall wait until they drop again.” It comes to an abrupt end when people discover that the inflation will continue, that it causes the rise in prices, and that therefore prices will skyrocket infinitely. The critical stage begins when the housewife thinks: “I don’t need a new frying pan today; I may need one in a year or two. But I’ll buy it today because it will be much more expensive later.” Then the catastrophic end of the inflation is close. In its last stage the housewife thinks: “I don’t need another table; I shall never need one. But it’s wiser to buy a table than keep these scraps of paper that the government calls money, one minute longer.' - Ludwig von Mises - Theory of Money and Credi

A BOTTOM – LINE(conclusion)
We should not accept government monkeying with how they measure and report cost of living changes, UNLESS every time they report numbers via their new method they also publish the results via prior measurement methods in a chart such as the above.We should not accept higher than a 0.5% to 1% rate of inflation .We should not provide cost of living protection to federal and state & local government employees, or welfare recipients and seniors if not equally provided to all families, as such is a negative to equality and a negative to citizen awareness of true facts regarding inflation. We must make sure government employees do not receive compensation packages above the private sector, and they must be adjusted downward considering government employees often have more protection from layoffs. it's time to budget for government spending growth much slower than growth of the economy, aiming toward ratios experienced when our nation produced trade surpluses, low inflation and strong long-term increases in family incomes and savings with but one worker per family.

Global Employment Trends 2011: The challenge of a jobs recovery

INTRODUCTION
Global employment trends, points to a highly differentiated recovery in labour markets, will persistently high levels of unemployment as well as growing discouragement in developed countries, and with employment growth and continued high levels of vulnerable employment and working poverty in developing regions. These trends stand in stark contrast to the recovery seen in several key macroeconomic indicators: global GDP, private consumption, investment, and international trade and equity markets have all recovered in 2010, surpassing pre-crisis levels.
It shows that 55 per cent of the increase in global unemployment between 2007 and 2010 occurred in the Developed Economies and European Union (EU) region, while the region only accounts for 15 per cent of the world’s labour force. In several economies in the developing world, such as Brazil, Kazakhstan, Sri Lanka, Thailand and Uruguay, unemployment rates have actually fallen below their pre-crisis levels.
Worldwide, 78 million young people were unemployed in 2010, well above the pre-crisis level of 73.5 million in 2007, but down from 80 million in 2009. The unemployment rate among youth aged 15-24 stood at 12.6 per cent in 2010, 2.6 times the adult rate of unemployment. However, the ILO also warned that among 56 countries with available data, there were 1.7 million fewer youth in the labour market than expected based on pre-crisis trends, and that such discouraged workers are not counted among the unemployed because they are not actively seeking work.



DISCUSSION
The study points out that the delayed labour market recovery is seen not only in the lag between output growth and employment growth, but also in productivity gains poorly reflected in real wage growth in many countries. “This can threaten future recovery prospects, as there are strong linkages between growth in real wages, consumption and future investments.
It also finds that there were 630 million workers living with their families at the extreme US$1.25 a day level in 2009. This corresponds to an additional 40 million working poor, 1.6 percentage points higher than projected on the basis of pre-crisis trends.
AMONG OTHER KEY FINDINGS:
Total global employment in industry declined in 2009, which is a major divergence from the historical annual growth rate of 3.4 per cent over the period from 2002 to 2007. In the Developed Economies and European Union region, employment in industry plummeted by 9.5 million between 2007 and 2009, while in the developing regions industrial employment grew, though at a much reduced pace.
Global employment in agriculture grew in 2009, which represented a divergence versus historical trends and reflected that the lower-productivity agricultural sector often serves as a buffer for workers who lose jobs in manufacturing and services.
Increasing food prices around the world represent a growing threat. For non-agricultural sectors, continued sharp increases in food prices could lead to employment losses if inflation is passed on to other areas of the economy.
It underlines the importance of measures that can help boost employment generation and jump-start a sustainable jobs recovery, stressing that improved labour market outcomes would support a broader macroeconomic recovery and could help offset the adverse effects of fiscal consolidation.

GLOBAL EMPLOYMENT TRENDS FOR YOUTH.
This adds to growing evidence of a global situation in which young people face increasing difficulties when entering the labour force. One of the principal findings is that a global
Deficit of decent work opportunities has resulted in a situation in which one out of every three youth in
the world is either seeking but unable to find work, has given up the job search entirely or is working
but still living below the poverty line. Without the right foothold from which to start out
right in the labour market, young people are less able to make choices that will improve their own job prospects and those of their future dependents. This, in turn, perpetuates the cycle of insufficient education, low-productivity employment and working poverty from one generation to the next. Global Employment Trends for Youth will strengthen the capacity of the ILO’s programme on youth employment to provide assistance to countries in developing coherent and coordinated interventions on youth employment that are based on analytical reviews of labour market information.

CONCLUSION
At the end of the explanation the conclusion is here that a high level of unemployment as well as growing discouragement in developed countries and people faces many difficulities when they entering a labour force .In today’s Global Employment Trends report that, despite improvements in many economic indicators, global unemployment remains at crisis level.

Submitted to :-Mr. Gurdeepak singh
Submitted by:-pamita devi
MBA - 1
Section – B

The future of banking and finance

The future of Banking And Finance

BANKING-----The term fiance refers to a person to whom you are engaged to be married. The term fiance can refer to either the future bride or groom.

FINANCE-----1. A branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Simply, finance deals with matters related to money and the markets.

2. To raise money through the issuance and sale of debt and/or equity.

The Future of Finance: International Edition

By SIMON JOHNSON

Today's Economist

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

Bankers and hedge fund managers are fond of saying, “If you place restrictions on our activities in New York, we’ll just move elsewhere — like London.” This makes attitudes toward the financial sector in other countries — particularly Britain — highly relevant to the American public policy debate on financial regulation.

The benefits from banking, broadly defined, on its current scale and with its existing incentive structure are, at best, very limited. In contrast, the costs — both in the recent past and the likely future — are large and quite frightening. The fiscal position of Britain has been ruined by the measures the previous government put in place to support the big banks, directly and indirectly. Whatever your assessment of the fiscal-austerity measures being pushed hard by the new government, there is no question that much of the underlying problem arises from the continuing failure of financial regulation.

BANKING & FINANCE------Banking finance definition gives us information about the definition of banking and the definition of finance.

Banking refers to that process in which a bank which is a commercial or government institution offers financial services that include lending money, collection of deposits, issue of currencies and debit cards, and transaction processing etc. The majority of banks works as profit-seeking enterprises, however, a few government banks work as non-profit organizations. Central banks function as government agencies and they regulate the interest rates and circulation of money in the total economy.

The activities of banks can usually be categorized into the following types

* Receiving deposits from the customers and issue of current or checking accounts and savings accounts to businesses and individuals

* Providing financial consultation services to individuals and businesses

* Providing loans to businesses and individuals

* Encashment of checks

* Facilitation of monetary transactions, for example cashiers checks and wire transfers

* Issue of ATM cards, credit cards, and debit cards

* Offering safe deposit vaults for keeping valuables

* Encashment and distribution of bank rolls

* Retirement & pension planning

Banks can be widely categorized into two types:

Retail banks: These include

* Commercial banks

* Postal savings banks

* Private banks

* Community banks

* Community development banks

* Savings banks

* Building societies

* Offshore banks

Retail banking directly deals with small businesses and individuals, commercial banking, corporate banking services to important commercial organizations, and offering services to mid-market businesses.

Investment banks: The investment banks function as underwriters of stock and bond issues and also provide a number of related services. Examples of investment banks are merchant banks and venture capital firms. As a whole, investment banking deals with capital markets.

The financial transactions of a bank are carried out through a number of measures:

* Through branches

* Through ATMs (automated tellering machine)

* Telephone banking

* Online banking

* Through mail services

Finance deals with efficient allocation and distribution of resources by commercial entities, individuals, as well as other establishments over time taking into consideration the associated risks.

The term called finance can include any of the following areas:

* The process of managing money

* The study of money and other types of assets

* Managing and controlling those assets

* Identifying and handling project risks

If the term finance is used as a verb, it denotes provision of funds for individuals for buying cars or houses and businesses.

The function of finance is to apply a group of techniques which the corporate entities and individuals implement for managing their financial activities, specifically the margin of income and expenditure as well as investment risks.

Finance can be widely categorized into the following types:

* Personal finance

* Business finance

* Public finance

The major sources of financing include:

* Savings

* Loan or credit

* Taxes

* Donations

* Subsidies

* Grants

What is involved in Banking & Finance Law?

A major portion of work in Banking & Finance is of a transactional nature; you will complete your part in the transaction and move on to the next. A return to a completed transaction becomes necessary when disputes arise, constituting the contentious element of a Banking & Finance lawyer’s work. As a lawyer in this field, you can choose to specialize in a particular class of financing. These include project, acquisition, asset, property and islamic finance as well as securitisation, derivatives and capital markets.

Project finance normally involves making loans for various projects, while acquisition finance focuses on the lending on money to companies to purchase other entities. Asset finance, likewise, focuses on loans, however it is regarding the purchase or leasing of big-ticket items instead. There is straight-forward lending by a bank or other financial institution, and then there is Securitisation, when a lender offloads its loan portfolio to another company. Derivatives focus on the fixing of currency rates during a transaction and capital markets is where a borrowing entity issues bonds to investors. Another huge area, islamic finance, involves transactions or loans that comply with Shariah principles.

Across all modes and segments of finance, a lawyer will be required to assist with negotiations, provide assistance in structuring deals and complete due diligence on other parties, usually the borrowing entity. You will also act as a mediator between parties, helping all to reach common terms that are satisfactory to all involved. Throughout all of this, you will have to ensure that the deal is in line with all laws and regulations of the particular jurisdictions they involve, as well as completing formalities such as registration.

What is need for Banking & Finance Law?

Qualifications necessary to be a Banking & Finance lawyer are: an outstanding academic background, high knowledge levels in your specialist area, keen commercial awareness and an understanding of market realities.

You will have to analyze and predict future trends which may likely impact the transaction or deal and communicate this is a clear and concise way to your clients.

As such, paying attention to every detail and having an exact knowledge of the fine-print is essential.

A familiarity with legislation and regulatory mechanisms in countries where you clients have or are likely to have business interests and being able to reduce complex definitions and terminology into simple language clients can understand is invaluable. As with most high-level jobs, the ability to produce high-quality work consistently regardless of time constraints or deadlines is standard.

Current climate in Banking & Finance Law?

The US sub-prime market crisis has affected economies worldwide. Lending has been drastically reduced and a credit crunch has limited potential growth across most sectors. With too many players in the field, competition in the Banking & Finance legal services domain is extremely fierce.

Recent trends in the market include growth of investment funds taking on lending roles replacing banks as traditional lenders. Competition among financial institutions to grow their businesses have meant that borrowers have had plenty of options available for securing loans, though this has slowed down considerably with the credit crunch.

Banking & Finance litigation is also on the rise with insolvency cases increasing; money-laundering has become a major regulatory focus area and enforcement in general has picked up momentum in most economies.

CONCLUSION

* Banks provide security and convenience for managing your money and sometimes allow you to make money by earning interest. Convenience and fees are two of the most important things to consider when choosing a bank.

* Writing and depositing checks are perhaps the most fundamental ways to move money in and out of a checking account, but advancements in technology have added ATM and debit card transactions and ACH transfers to the mix.

* All banks have rules about how long it takes to access your deposits, how many debit card transactions you're allowed in a day, and how much cash you can withdraw from an ATM. Access to the balance in your checking account can also be limited by businesses that place holds on your funds.

* Debit cards provide easy access to the cash in your account, but can cause you to rack up fees if you're not careful.

* While debit cards encourage more responsible spending than credit cards, they do not offer the same protection or perks to consumers.

* Regularly balancing your checkbook or developing another method to stay on top of your account balance is essential to successfully managing your checking account and avoiding fees and bounced checks.

* If you have more money than you need to manage your day-to-day expenses, banks offer a variety of options for saving, including money market accounts, CDs, high-interest online savings accounts and basic savings accounts.

* To protect your money from electronic theft, identity theft, and other forms of fraud, it's important to implement basic precautions such as shredding account statements, having complex passwords and only doing online banking through secure internet connections.