After months of crises the latest piece of economic news, which is quite encouraging is that the US trade deficit for the month of August has fallen 2.4 percent to $57.6 billion from $59 billion in July.This is the smallest since January according to the Commerce Department.
US exporters benefited from a weak dollar and strong overseas growth to notch up record exports of $138.3 billion.The decline in the deficit would have been larger but for the increase in oil prices.Significantly the deficit with China has dropped 5.3 percent to $22.5 billion.It seems that the efforts of the government in this direction are finally having some effect.This decrease has also been aided by the various recalls of Chinese made goods which affected their demand to some extent.
To appreciate the significance of this development it is necessary to understand why consistently rising deficits threaten to disrupt the US economy.A deficit as everybody knows arises when the value of goods and services exported is less than the value of the goods and services imported.In such a situation foreign countries and corporations are left holding dollars. Increasing deficits year after year imply that the supply of dollars with them also goes on increasing.The fear that is uppermost in everyone's mind is that a point will come when they may decide that it is no longer worthwhile to hold dollars, and they may decide to sell some of those dollars causing it to lose value sharply. This will lead to a spike in the prices of vital imports like oil for instance and place pressure on the US economy.In order to preserve the value of the dollar the US would have to increase interest rates which would affect economic growth, lead to unemployment and the entire vicious cycle would follow.
So far the US has been spared these consequences for some very simple reasons.The US economy was the only one which was large enough to absorb the huge surpluses generated by the oil exporting countries and countries like China and Japan.The US needed these dollars to finance its development needs as in recent times it has become a nation which saves less than it needs.So these trade surpluses have flown back to the US.Finally the US dollar has been a safe haven currency in an age of international turmoil.But now with the growth of the Eurozone economy and the rapid pace of development of the BRIC nations, coupled with a slowing of the US economy there is a real danger of the US dollar falling too far and too fast as people seek to shift to nations offering prospects of higher returns.
It is in this background that the decline in the US trade deficit assumes significance. Further declines coupled with a growing economy will result in a drastic reduction of the trade deficit as a percentage of GDP which will be desirable for the health of both the US as well as the global financial system.
Simple Steps To Prevent Foreclosure
The housing boom which lasted till last year saw prices moving up rapidly.As a result home buyers not only had to put in that little bit extra to buy a home, but some also overextended themselves by buying homes they really couldn't afford. In order to buy homes people used innovative and risky schemes of financing such as no down-payment, interest only, negative amortization and piggyback loans which put the borrowers in a precarious position. The most popular was the Adjustable Rate Mortgage or ARM in which the borrower paid very low rates of interest for the first two years and the rates automatically reset thereafter at much higher levels.Such loans usually carry a pre-payment penalty to discourage premature repayment.
Things were OK as long as prices were going up rapidly, often on a monthly basis.People were confident that should the need arise they could sell their house, pay off the loan, and still be left with a profit.But with prices falling the homeowners are staring at losses and high interest borrowings which need to be repaid. Unfortunately the future is also quite bleak. many of the loans that will automatically reset after two years were issued in 2005 and 2006. It is feared another wave of foreclosures will hit the market in late 2007 and early 2008 further depressing property prices. According to Realty Trac Inc. foreclosure filings in August this year were 243,947 a rise of a whopping 115 percent over the same month a year ago. This figure is also up by almost 35 percent over the figure of 179,599 in July this year. Desperate sellers are unable to find buyers, and with realty developers offering steep discounts they find that the value of their houses has fallen further.
But there are some simple things you can do to prevent foreclosure.
The very first thing to do is to call your mortgage lender. Remember they are not in the business to foreclose on property. They will work with you and help you find a way to keep your house.Discuss your problem with them honestly and in detail. They can help you in many ways. Each case is usually considered on an individual basis. The lender usually starts with debt counseling He looks at all your outstanding debts to see if they can be restructured or consolidated. He can then help you prepare a budget to structure a repayment plan. He may also agree to extend the period of your mortgage which will reduce your monthly payment. Overdue payments can be added to the new loans. If you are working with your lender he may grant you extra time to get your problems under control. He may allow you to sell off your home and repay the entire loan. Alternatively you may sign the house over to the lender. This is a kind of voluntary foreclosure but you avoid the public notice of a foreclosure sale.Also if the house sells below the debt amount you may not be liable for the loss.As a last resort you may file for bankruptcy. Although this will severely damage your credit record for seven years, foreclosure proceedings are usually stopped till bankruptcy is resolved.
You can also tighten your belt, go in for strict budgeting and dig into various savings here and there to come up with that bit of extra cash which will see you through this bad patch and let you keep your home.Contact an HUD approved counseling agency only. Beware of scamsters who promise to get foreclosure proceedings stopped if you sign documents appointing them as your agent.You may be signing over the title of your property.
Act promptly and you may continue to enjoy the home you have bought.
Things were OK as long as prices were going up rapidly, often on a monthly basis.People were confident that should the need arise they could sell their house, pay off the loan, and still be left with a profit.But with prices falling the homeowners are staring at losses and high interest borrowings which need to be repaid. Unfortunately the future is also quite bleak. many of the loans that will automatically reset after two years were issued in 2005 and 2006. It is feared another wave of foreclosures will hit the market in late 2007 and early 2008 further depressing property prices. According to Realty Trac Inc. foreclosure filings in August this year were 243,947 a rise of a whopping 115 percent over the same month a year ago. This figure is also up by almost 35 percent over the figure of 179,599 in July this year. Desperate sellers are unable to find buyers, and with realty developers offering steep discounts they find that the value of their houses has fallen further.
But there are some simple things you can do to prevent foreclosure.
The very first thing to do is to call your mortgage lender. Remember they are not in the business to foreclose on property. They will work with you and help you find a way to keep your house.Discuss your problem with them honestly and in detail. They can help you in many ways. Each case is usually considered on an individual basis. The lender usually starts with debt counseling He looks at all your outstanding debts to see if they can be restructured or consolidated. He can then help you prepare a budget to structure a repayment plan. He may also agree to extend the period of your mortgage which will reduce your monthly payment. Overdue payments can be added to the new loans. If you are working with your lender he may grant you extra time to get your problems under control. He may allow you to sell off your home and repay the entire loan. Alternatively you may sign the house over to the lender. This is a kind of voluntary foreclosure but you avoid the public notice of a foreclosure sale.Also if the house sells below the debt amount you may not be liable for the loss.As a last resort you may file for bankruptcy. Although this will severely damage your credit record for seven years, foreclosure proceedings are usually stopped till bankruptcy is resolved.
You can also tighten your belt, go in for strict budgeting and dig into various savings here and there to come up with that bit of extra cash which will see you through this bad patch and let you keep your home.Contact an HUD approved counseling agency only. Beware of scamsters who promise to get foreclosure proceedings stopped if you sign documents appointing them as your agent.You may be signing over the title of your property.
Act promptly and you may continue to enjoy the home you have bought.
Dilemmas Facing Islamic Banking Today
One of the most interesting developments in the field of international finance over the last couple of decades has been the development of Islamic banking.Although this form of banking has been followed for centuries it is only recently that it has caught the attention of the world, when flush with petro -dollars many Islamic countries in the Middle East started to promote Islamic banking in their respective countries.This move was prompted by the desire to run their nations according to the principles of 'Sharia.'
Contrary to popular perception, Islamic banking is not against the idea of a profitable return on an investment. It is just opposed to the idea of interest paid on deposits or any other form of pre- determined return, which is considered to be 'Riba' or usury.Additionally these banks seek to channelize investments into desirable business activities and investments in forbidden businesses such as alcohol, gambling and pork etc. are banned.
Islamic scholars have long accepted the idea of profit sharing for Islamic bank depositors and borrowers as a proper method of compensation.Today Islamic banking is already managing funds in excess of $200 billion and it is growing rapidly.
Amongst the dilemmas that Islamic banks face in an increasingly globalised economy with fewer and fewer controls on cross border foreign exchange movements is that in order to attract depositors they must be able to assure a certain minimum return over a given time period. Too low a rate of interest on long term investments in an inflationary environment may just not be acceptable to most people. More importantly they need to be viewed as independent financial institutions and not as extensions of their respective governments which may require them to finance their welfare programs at the expense of their depositors.
All interest free banks agree on the basic principles but individual banks differ greatly from each other.These differences are due to the differences in the laws of their respective countries, the objectives of the individual banks and also the degree of their interaction with other interest based banks. These factors have inhibited the growth of a truly international bank which is so important these days.These banks also seem to be lagging behind in providing several modern banking and financial products and services which are in demand.
Finally there is increasing criticism, often in the countries' of their origin itself,that the financial charges they receive from their borrowers is nothing but interest called by a different name.
In spite of these problems the size of this industry, fed with an unending supply of petro-dollars, is simply too large to be ignored.In fact it needs to be studied carefully and suitably strengthened to meet the challenges posed by modern banking methods so that it is able to discharge effectively the role assigned to it.
Contrary to popular perception, Islamic banking is not against the idea of a profitable return on an investment. It is just opposed to the idea of interest paid on deposits or any other form of pre- determined return, which is considered to be 'Riba' or usury.Additionally these banks seek to channelize investments into desirable business activities and investments in forbidden businesses such as alcohol, gambling and pork etc. are banned.
Islamic scholars have long accepted the idea of profit sharing for Islamic bank depositors and borrowers as a proper method of compensation.Today Islamic banking is already managing funds in excess of $200 billion and it is growing rapidly.
Amongst the dilemmas that Islamic banks face in an increasingly globalised economy with fewer and fewer controls on cross border foreign exchange movements is that in order to attract depositors they must be able to assure a certain minimum return over a given time period. Too low a rate of interest on long term investments in an inflationary environment may just not be acceptable to most people. More importantly they need to be viewed as independent financial institutions and not as extensions of their respective governments which may require them to finance their welfare programs at the expense of their depositors.
All interest free banks agree on the basic principles but individual banks differ greatly from each other.These differences are due to the differences in the laws of their respective countries, the objectives of the individual banks and also the degree of their interaction with other interest based banks. These factors have inhibited the growth of a truly international bank which is so important these days.These banks also seem to be lagging behind in providing several modern banking and financial products and services which are in demand.
Finally there is increasing criticism, often in the countries' of their origin itself,that the financial charges they receive from their borrowers is nothing but interest called by a different name.
In spite of these problems the size of this industry, fed with an unending supply of petro-dollars, is simply too large to be ignored.In fact it needs to be studied carefully and suitably strengthened to meet the challenges posed by modern banking methods so that it is able to discharge effectively the role assigned to it.
Understanding Recent Stock Market Moves
The US housing market was a bubble that has well and truly burst.It is estimated that we are heading for 2 million foreclosures this year a figure not heard of since the Great Depression. What's more, the Fed's half point rate cut is not expected to stem the slide.Then there has been the sub-prime crisis.The top financial institutions of the nation have disclosed losses of billions of dollars on loans made to borrowers with poor credit histories. Retail sales are slowing and so is industrial output. To make matters worse energy prices are at record levels.
Yet the stock markets have proved everybody wrong with the Dow rising from about 12800 in mid August to 14066 on Friday, a gain of about 1200 points in a month and a half.
So what is behind this huge rally.Conventional wisdom would have had us believe that the housing crisis was bound to affect the other sectors of the economy causing stock prices to fall. At least that's what always happened in the past. But not this time round. So far the housing market crisis appears to have been contained in as much as it has not noticeably affected other sectors of the economy. The sub-prime crisis at one time threatened to get out of hand. But the Fed's rate cut indicated that it was willing to step in to inject liquidity into the system as and when required.This reassurance seems to have been all that the stock market needed.
The weaker dollar has also helped a lot.While the domestic economy has slowed, world economic growth has remained robust.The weak dollar has enabled top US corporations to increase overseas sales and reap bumper profits.It is these large corporations which have the largest weightage in the stock market indices.Record energy prices have ensured windfall gains for the giant oil companies.These too have a significant weightage in the indices. If these companies do well the stock market will continue to do well.
The disclosure of losses by the financial companies has been seen as a welcome sign of transparency and there is a belief that the worst is over.The latest jobs report shows that more jobs were created in September than expected and the August report was also revised upwards showing a rise instead of a decline.These figures indicate that far from a recession the US economy will continue to grow at a moderate pace.
Experts however warn that we are not out of the woods as yet and that the sub-prime crisis may come back to haunt us later in the year.Also interest rates are not likely to fall much further, meaning that easy availability of cash is a thing of the past.High interest rates also discourage merger and acquisition activity, which reduces premiums which are offered for companies' stocks. With less cash to spare buybacks by companies also get reduced and this depresses share prices.
Experts are clearly divided on where the markets are heading.Morgan Stanley says that its indicators are showing a 'full house' in terms of sell triggers.Many others predict that even if there is no collapse the markets have topped off. Some feel that the markets will be higher in December from where they are today.
Investors would therefore do well to closely watch events unfold over the next few months and take necessary steps to protect their investments rather than have things blow up in their faces.
Yet the stock markets have proved everybody wrong with the Dow rising from about 12800 in mid August to 14066 on Friday, a gain of about 1200 points in a month and a half.
So what is behind this huge rally.Conventional wisdom would have had us believe that the housing crisis was bound to affect the other sectors of the economy causing stock prices to fall. At least that's what always happened in the past. But not this time round. So far the housing market crisis appears to have been contained in as much as it has not noticeably affected other sectors of the economy. The sub-prime crisis at one time threatened to get out of hand. But the Fed's rate cut indicated that it was willing to step in to inject liquidity into the system as and when required.This reassurance seems to have been all that the stock market needed.
The weaker dollar has also helped a lot.While the domestic economy has slowed, world economic growth has remained robust.The weak dollar has enabled top US corporations to increase overseas sales and reap bumper profits.It is these large corporations which have the largest weightage in the stock market indices.Record energy prices have ensured windfall gains for the giant oil companies.These too have a significant weightage in the indices. If these companies do well the stock market will continue to do well.
The disclosure of losses by the financial companies has been seen as a welcome sign of transparency and there is a belief that the worst is over.The latest jobs report shows that more jobs were created in September than expected and the August report was also revised upwards showing a rise instead of a decline.These figures indicate that far from a recession the US economy will continue to grow at a moderate pace.
Experts however warn that we are not out of the woods as yet and that the sub-prime crisis may come back to haunt us later in the year.Also interest rates are not likely to fall much further, meaning that easy availability of cash is a thing of the past.High interest rates also discourage merger and acquisition activity, which reduces premiums which are offered for companies' stocks. With less cash to spare buybacks by companies also get reduced and this depresses share prices.
Experts are clearly divided on where the markets are heading.Morgan Stanley says that its indicators are showing a 'full house' in terms of sell triggers.Many others predict that even if there is no collapse the markets have topped off. Some feel that the markets will be higher in December from where they are today.
Investors would therefore do well to closely watch events unfold over the next few months and take necessary steps to protect their investments rather than have things blow up in their faces.
What College Students Must Know About Credit Cards
Not very long ago credit cards were reserved for those who had a steady source of income.A college student couldn't get one unless a parent co-signed.
Over the last decade things have changed.The usual image of a hard up student has changed into one of a financially independent person, all thanks to the credit card.
But now suddenly questions are being asked as to whether students are graduating with too high a level of debt.
Credit card companies are marketing aggressively to college students.They are offering students, free lunches, T shirts and other gifts if they fill up a credit card application. Unfortunately students pay more attention to the free gifts rather than the terms and conditions of the credit card.
Every year, come fall and the beginning of a new academic year, attention turns to credit card companies and the marketing policies followed by them for students.Several universities have now placed restrictions on the card marketing companies to prevent indiscriminate issue of credit cards to students.But credit card companies are able to get around these restrictions fairly easily.They simply set up shop across the street from the campuses that place restrictions on their activities.
Many card issuers also strike deals with colleges paying them millions of dollars a year in return for exclusive access to their students.This is now turning into an important source of finance for these universities.
The reasons why college students are such a prized catch are not far to seek.They earn more during their lifetime than those who don't go to college and some can also rely on their parents to clear their credit card debts.Added to this is a growing market with several million new potential customers becoming available every year.This is important in an over saturated market with each household having 14 cards on an average.Students also tend to be more loyal and will usually stick to the company that gave them their first card.Once they graduate their financial needs increase immediately.Car loans, mortgages and various other financial requirements need to be met. Existing relationships tend to expand to take care of changing financial needs.
But the flip side is that maybe credit cards are too easily available and it is not unusual for a student these days to get a second one without having made a payment on the first.
The truth is that students pay more to credit card companies by way of late payment fees or by way of fees for exceeding their credit limit than older people.So students are targeted by card companies also because they are a more profitable proposition.
Since credit cards are indispensable there are some things a student can do to stay clear of debt.To start with resist free gifts.Sign up for a credit card only after fully understanding its terms and conditions.Please compare several cards before choosing one.Fees structures and interest rates can vary significantly.A card with your university's logo may not be the best deal.Finally don't buy what you cannot afford.Learn to pay off your balance on time and in full every month.
Avoiding credit card debt will make college a more enjoyable experience.
Over the last decade things have changed.The usual image of a hard up student has changed into one of a financially independent person, all thanks to the credit card.
But now suddenly questions are being asked as to whether students are graduating with too high a level of debt.
Credit card companies are marketing aggressively to college students.They are offering students, free lunches, T shirts and other gifts if they fill up a credit card application. Unfortunately students pay more attention to the free gifts rather than the terms and conditions of the credit card.
Every year, come fall and the beginning of a new academic year, attention turns to credit card companies and the marketing policies followed by them for students.Several universities have now placed restrictions on the card marketing companies to prevent indiscriminate issue of credit cards to students.But credit card companies are able to get around these restrictions fairly easily.They simply set up shop across the street from the campuses that place restrictions on their activities.
Many card issuers also strike deals with colleges paying them millions of dollars a year in return for exclusive access to their students.This is now turning into an important source of finance for these universities.
The reasons why college students are such a prized catch are not far to seek.They earn more during their lifetime than those who don't go to college and some can also rely on their parents to clear their credit card debts.Added to this is a growing market with several million new potential customers becoming available every year.This is important in an over saturated market with each household having 14 cards on an average.Students also tend to be more loyal and will usually stick to the company that gave them their first card.Once they graduate their financial needs increase immediately.Car loans, mortgages and various other financial requirements need to be met. Existing relationships tend to expand to take care of changing financial needs.
But the flip side is that maybe credit cards are too easily available and it is not unusual for a student these days to get a second one without having made a payment on the first.
The truth is that students pay more to credit card companies by way of late payment fees or by way of fees for exceeding their credit limit than older people.So students are targeted by card companies also because they are a more profitable proposition.
Since credit cards are indispensable there are some things a student can do to stay clear of debt.To start with resist free gifts.Sign up for a credit card only after fully understanding its terms and conditions.Please compare several cards before choosing one.Fees structures and interest rates can vary significantly.A card with your university's logo may not be the best deal.Finally don't buy what you cannot afford.Learn to pay off your balance on time and in full every month.
Avoiding credit card debt will make college a more enjoyable experience.
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