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In August 2007, the nation was stunned by the collapse of a major Minneapolis bridge, killing nine. The bridge had been rated structurally deficient by the U.S. government as far back as 1990, and it was only one of more than 70,000 bridges across the country with that rating. The American Society of Civil Engineers estimated that it would take nearly $190 billion to fix the country’s failing bridges over the next two decades. Minnesota and other states have the manpower and the materials to rebuild. What they lack is only the money to do it. Municipal governments have to borrow money by issuing bonds, and the interest they must pay on these bonds is going up.

On March 13, 2008, Erik Sirri, director of the SEC’s division of trading and markets, told Congress that the credit crisis has spread to municipal bond auctions. “There is no question that the recent dislocations in the municipal bond markets have created unanticipated hardships for municipal issuers and in some cases dramatically increased their borrowing costs,” Sirri said. The inability of cities and states to sell municipal bonds to investors at reasonable interest rates seriously threatens plans to build new roads, schools, airports and other public works projects.1

Although the cost of borrowing is going up for municipal governments, this is not because they are bad credit risks. In fact, they are extremely good credit risks. Creditors know where to find them, and local governments have the power to tax to pay their bills. The problem lies with the bond insurers called “monolines,” which have ventured into the very risky mortgage-backed securities market. This has put the insurers’ triple-A ratings in jeopardy, along with the ratings of the municipal bonds they insure.

While borrowing costs for municipal governments are skyrocketing, the interest rate the Federal Reserve charges to banks has been going down, even though banks are proving to be much riskier investments than local governments. The Federal Reserve is a private banking corporation that is owned by other banks. It was established in 1913 to prevent bank runs and otherwise keep the banks from getting into trouble for over-leveraging (lending out many times their assets), and that remains its principal function today. The Federal Reserve recently extended $200 billion in financing to 20 top investment banks at wholesale rates, but these low rates are not being passed on to municipal governments or home buyers. The Federal Reserve is evidently working for the banks more than for taxpayers or local governments.Thinking Outside the Box: The Minnesota Transportation Act

Many people are getting tired of waiting for the Federal Reserve and the federal government to act, and one of them is a Minnesota resident named Byron Dale. Dale has drafted a bill called “the Minnesota Transportation Act” (MTA), which is scheduled for hearing before the Minnesota Senate Transportation Committee on March 25, 2008. If adopted, the bill could represent a major innovation in the way state and local projects are funded. It would mandate Minnesota’s Transportation Department and State-chartered banks to enter into an agreement providing that the banks would advance funds for legislatively-approved transportation projects in the same way that banks make commercial loans – simply by “monetizing” the projects themselves. Banks routinely monetize the promissory notes of borrowers just by making book entries to a checking account and saying “you have a new deposit with us.” (More on this below.)

Under the MTA, the state-chartered banks would create a pass-through account titled an Asset Monetization Account (AMA), monetizing the bid value of projects. This would be done in the same way that banks monetize collateral, except that the deposit would go on the bank’s books as an asset rather than a liability, turning the bid value of the project into “money” without debt. This money would be debited electronically out of the AMA and credited to the State’s Transportation Account (STA), from which it would then be debited out and credited in to the contractor’s bank account in a state bank, according to the terms of the contract. The contractor would spend this money to complete the project. The money would flow into Minnesota’s economy, where it would provide for better, safer, more durable roads and bridges. It would be used to purchase goods and services, benefiting business. It would go to pay taxes, helping the State balance its budget. And it would flow back into the state-chartered banks as interest on outstanding loans, reducing the number of loan defaults and improving the profits of the state-chartered banks. In this way, says Dale, the MTA would benefit every segment of society.Too Radical? Maybe Not . . .

Dale says he has been proposing this sort of state funding alternative for years; but only now, with the looming liquidity crisis, have legislators begun to take him seriously. His plan may not be such a radical departure from existing practice as it sounds. Commercial banks are already in the business of creating money. Except for coins, our entire money supply is now created by banks in the form of loans.2 Indeed, banks create all the money they lend. This was confirmed by the Chicago Federal Reserve in a booklet called “Modern Money Mechanics,” which states:

“Of course, [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount].”3

Many other authorities have confirmed this money-creating mechanism of commercial banks.4 State-chartered banks get their authority to create money from the State, and the State has the authority to determine the purpose for which banks create money. State banks are now permitted to create money to monetize a mortgage or other promise to repay. They could as easily be authorized to “monetize” the promise of contractors to deliver labor and materials to the State in the form of road and bridge repair and construction.

The argument against this creative approach is that it would be inflationary, but would it? Inflation results when “demand” (money) increases faster than “supply” (goods and services); and in this case goods and services would be increasing along with the money available to spend, keeping the money supply in balance and prices stable. In fact, it is the lending of money created out of thin air that is inflationary, because banks create the principal but not the interest necessary to pay back their loans. Additional loans must therefore continually be taken out just to service the “money” (or debt) that is already in the money supply; and this newly-created money goes into the pockets of middlemen rather than contributing to the productivity of the community. “Demand” (money) thus goes up without a corresponding increase in “supply,” creating price inflation.

The solution to this conundrum is to authorize banks to monetize the production of real goods and services, creating supply and demand at the same time. There is substantial precedent for this approach, stretching as far back as the early American colonies:

* In the early eighteenth century, the colony of Pennsylvania issued money that was both lent and spent by the local government into the economy, producing an unprecedented period of prosperity. This was done not only without producing price inflation but without taxing the people.

* When Abraham Lincoln needed money to fund the American Civil War, rather than paying 25 to 36 percent interest charges, he avoided going into debt by printing Greenback dollars that were “legal tender” in themselves. Again, historians of the period attest that this issue of Greenbacks was not responsible for price inflation.

* A successful infrastructure program funded with interest-free “national credit” was instituted in New Zealand after it elected its first Labor government in the 1930s. Credit issued by its nationalized central bank allowed New Zealand to thrive at a time when the rest of the world was struggling with poverty and lack of productivity.

* The island state of Guernsey, located in the British Channel Islands, has been funding infrastructure with government-issued money for over 200 years, without creating price inflation and without government debt.5 But Is It Constitutional?

These governments could create the money they needed because they were sovereign entities, but what about individual States governed by a federal Constitution? In the United States, the U.S. Constitution controls. But that august document says very little about the creation of money – so little that banks have stepped in and taken over the business by default. Here are the sole Constitutional provisions directly addressing the creation of money:

Article I, Section 8, Clause 5

: The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.
Article I, Section 10, Clause 1

: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

Congress has been given the power to coin money, but minting coins is not the same thing as issuing paper money, checkbook money, accounting-entry money, or electronic money – the forms of money used most often today. Arguably, “to coin” money was an archaic way of saying “to create” money, but then what is to be made of the clause stating, “No state shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debt”? “Coin” here clearly means precious metal coins, period.

That clause is interesting for another reason: when was the last time you heard of a State paying its debts in gold or silver coin? States routinely pay their debts with the bank-created accounting-entry money that now composes over 97 percent of the U.S. money supply (M3), and that form of money is omitted from the Constitution altogether. The States therefore violate the Constitution every day, something they must do if they are to pay their debts at all, since gold and silver coins are no longer in general circulation. The Constitution obviously needs to be amended to suit the times. Meanwhile, the Tenth Amendment to the Constitution (part of the Bill of Rights) provides:

X – Rights of the States under Constitution

: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
Creating checkbook money is not specifically delegated to the United States, so it must be delegated to the States, unless it is specifically prohibited to them. What about the provision that “No State shall . . . emit Bills of Credit”? According to “the ‘Lectric Law Library,” “bills of credit are declared to mean promissory notes . . . . Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day.” Bills of credit are promises to pay later rather than what is being discussed here: checkbook money issued as “legal tender” – the sort of dollars banks issue every day when they make commercial loans. The Constitution does not say who is authorized to issue this sort of money – whether in paper, electronic or accounting-entry form – so under the Tenth Amendment, this right is reserved to the States and to the People.

As the credit crisis deepens and exposes the inability of the existing banking structure to meet the public’s needs, creative funding plans similar to the proposed MTA could be popping up in communities around the country. If the U.S. Congress and the privately-owned Federal Reserve will not issue the funds necessary for bridge and road repair and other urgent public projects, we can encourage our State legislators to fill the breach; and if they won’t do it, we the people can get together, apply for a bank charter, and create the funding ourselves. (See E. Brown, “How to Start Your Own Bank,” webofdebt.wordpress.com, February 23, 2008.)

Author: Ellen Brown
Article Source: EzineArticles.com
Credit card currency-exchange fees

If you’re ready to find the best CD rates in your area or on a national level, it’s not as hard as you think. It only takes a few minutes of your time and another few minutes to sign up for a new account if you’re new to the bank. Below, we will highlight exactly how you find the best CD rates you’re looking for and where to find them.

Know exactly what you want

Before you start your search, know exactly how much money you’re going to invest into a CD. This will help your search when you’re looking at online banks or at your local banks. A majority of the banks you look at will require some sort of minimum. The minimum usually ranges anywhere from five hundred dollars and up. Generally, the higher the minimum is, the better the rate you’re going to get but this isn’t always the case. Once you know how much you’re going to invest, jot this down on a piece of paper to begin your search.

How long do you want?

When you invest into a CD, you’re generally locking your money with the bank for a certain time period. Depending on the time period, this will determine how much you’re interest is going to be. The longer you let the bank hold onto your money, the more you’re going to get on your money. The only downfall is, is that you’re not going to be able to touch this money until the CD matures. You can access your money before the CD matures but you’re going to look at early withdrawal penalties with your bank.

Bank CDs generally come in all sorts of terms. Some of the popular lengths are 6 months, 1 year, 2 years, and 5 years. Once again, depending on how long you want to have the bank hold onto your money, it’s all up to you. Once you decide, jot this down along side of the amount you’re going to invest. Typically, this is what the banks will need.

Find a bank

You’re usually going to find the best rate online. When you’re searching for a CD rate, make sure that the bank is FDIC insured and also make sure that the bank has a good reputation. If you’re uncomfortable with an online bank, you may also check your local branches. Don’t go with the first local branch you encounter, there are chances that other banks are offering higher CD rates.

Whether you want to apply online or locally, it’s all up to you. If you do apply online, you’re going to get a better rate. Once you find the proper bank, the bank will be able to guide you through the process on how to set it up. If you want to find out how much money you’re going to make on that CD, make sure you use some helpful CD rate calculators online. This will show you the exact amount you’re going to receive from the bank at the end of the maturation for the CD.

Author: Tom Tessin
Article Source: EzineArticles.com
Beading Necklace

Lately there has been a lot of talk about the federal funds rate. This is something that dominates headlines whenever there is a change in this rate. Most recently the Federal Reserve made a huge rate drop. The 1st drop was 3/4ths of a percent, then shortly after by another ½ percent bringing the rate all the way down to 3%. Why such the hype? How does this affect individuals finances?

What is the Federal Funds Rate?

The federal funds rate is the interest rate that banks lend balances to other depository institutions, usually overnight. This rate is the rate that banks can borrow from the Federal Reserve, or in other words, it is the lowest possible rate that banks can charge on interest. Changing this rate is one of the primary tools that the Federal Reserve uses to regulate the supply of money in the US economy.

The Effect of lowering the Federal Funds Rate

By lowering the rate, borrowing becomes cheaper for banks and with competition among the banks they will pass this savings onto their customers. This will make borrowing cheaper for individuals because the rate at which banks can lend is less and the default risk also goes down because there is not as much interest to pay by the individual. The purpose of lowering the Federal Funds rate is to create a domino effect that will eventually stimulate the economy. The cycle it is suppose to follow is this: the Federal Reserve lowers rates, banks lower rates, individuals will borrow more money, the borrowed money buys goods, the sellers of the goods make more money and deposit into banks, banks have more money to lend, then repeat this cycle and the economy is stimulated.

What this means to most individuals in the near and distant future?

This will help out many individuals with their credit card interest rates because the prime rate, which directly influences credit card interest is highly correlated to the Federal Funds rate. From the domino effect, credit card lenders are also able to obtain a lower borrowing rate and therefore competition will force them to decrease their rates. This is one thing that individuals that carry balances on their credit card should be aware of because sometimes the lender will keep charging the same rate. An individual who is aware of this can most of the time, contact the credit card company and demand a lower rate.

The lowering of the federal funds rate will also decrease the interest earned in savings accounts and in CDs. This can force many individuals to seek better investment options for their funds because the interest earned in savings accounts and CDs is very minimal, most likely not even enough to keep up with inflation. This can also be good for the stock market because this can cause higher demand for publicly traded stocks, therefore driving up the prices and increase returns. (Also returns can go up from the domino effect created from the dropping of the fed rate, which also explains why there is a sudden surge in stock prices when there was an unexpected decrease of the federal funds rate)

One misconception about the fed lowering the Federal Funds rate is that it directly influences mortgage rates. Mortgage rates are much more complex in how they are determined than just by the Federal Funds rate. Mortgage rates are based on long term rates, while federal funds rate is a short term rate. Mortgages are priced like the stock market, if there is a expected drop in the federal funds rate, the mortgage rate will price it into the rate before the rate drop even happens. An unexpected rate drop can influence mortgage rates, but only by a small amount. The fed rate is an indirect factor in determining the long term rates. Even though it is only a small indirect factor, long term interest rates are very low right now and locking in a safe, low fixed rate at the current time may be a good idea.

Overall, the rate cut is a good thing for credit card interest and other short term loans, but on the negative side, savings accounts will not earn as much interest. If all goes as planned the economy will get the extra boost it needs to stay out of a recession, while also indirectly making a positive influence on long term interest rates and keeping inflation in check.

Author: Manny Vetti
Article Source: EzineArticles.com
Duty on LCD/Plasma TV

Of all the ways the Federal Reserve controls the money supply, the one that gets the most publicity concerns interest rate changes.

Before scheduled Federal Reserve meetings, you’ll hear a lot of speculation about what the Fed will do. These speculations affect the stock market. Media reports also speculate about the effect of these possible changes on consumer credit cards, mortgages, and auto loans.

All of this media attention and speculation is a bit misleading, because any changes the Fed makes in the rates do not affect consumers directly. The interest rate, also called the discount rate, does not refer to your credit card interest. It refers to the percentage the Federal Reserve banks charge commercial banks when they borrow money.

The Fed changes the percentage to make it more or less profitable for commercial banks to borrow money. The banks use this borrowed money to make loans to their customers.

These are the essential points to keep in mind:

1. The purpose of the Federal Reserve system is to control the amount of money in the system.

2. The purpose of commercial banks is to make money. They make money by loaning money to borrowers.

Whenever the Fed increases the amount that the commercial banks must pay to borrow money, the banks cannot make as much profit on their loans to its customers. When the Fed decreases the amount, the commercial banks can make more profit on their loans to bank customers.

When the Fed changes the rates it charges banks, this affects the speed of money in the economic system. The lower the interest cost, the faster banks can loan out money and increase the amount of money in the system. The higher the cost, the slower banks can loan out money. So, even though the percentage directly affects banks, these rate changes matter to all of us.

The critical point is that consumer interest is not directly related to changes in the Fed interest rate. The Fed does not change consumer percentages. The banks might change your  rates on credit cards or your adjustable rate mortgage, but the change is not directly tied to changes in the rate the Fed charges banks to borrow money.

Author: Kalinda Rose Stevenson, PhD
Article Source: EzineArticles.com
Duty tariff

Opening an offshore bank account is a matter which should be discussed in detail with a financial advisor such as Estate Street Partners and possibly a lawyer, depending on your individual circumstances and reasons for wanting the account. There has been negative press involving owners of offshore accounts who abuse the bank services to launder money or commit other forms of fraud (tax evasion, hiding money for divorce purposes, etc).

CONS OR DISADVANTAGES OF OFFSHORE BANKS

Offshore banks also require large sums of money as deposit, and there can be substantial annual membership and maintenance fees if you don’t understand all the terms of the agreement. A knowledgeable advisor will help minimize your risk by informing you of any changes to domestic and foreign banking laws. When choosing an offshore bank you have a number of banks to choose from, although the most common and sought after accounts are in Switzerland and the Cayman Islands due to their size and reputation.

If you feel that an offshore account is right for your situation, there are several questions you should discuss with your advisor when selecting a bank:

1. What services does this bank offer?

2. How will you access your money? (check book, debit card, etc)

3. Are there fees associated with withdrawing money from the account?

4. How easy is it to transfer funds, and is your money secure if the bank goes under?

ADVANTAGES OF OFFSHORE ACCOUNTS WITH GOOD INTEREST RATES

Many offshore banks offer personal services similar to those offered by domestic banks. In addition to a regular savings account, you may have the option of a debit or credit card from which to withdraw funds. Some countries will also sell you a mortgage and offer loans from your offshore account.

Since offshore banks are not regulated in the same manner as domestic banks, the interest rate on your loan will be at a much more competitive rate than here in the United States. The offshore banks are competing for business which will hopefully bring revenue to their country, and with lower overhead costs than domestic banks they are able to offer higher interest rates on deposits.

COMPANY BENEFITS IN OFFSHORE BANKING AND LOANS

Large US-based companies are also taking advantage of the benefits associated with offshore bank loans. Companies will be afforded the same rights of privacy as an individual account holder, and they will be allowed to finance their operations at a much more reasonable rate than if they kept strictly domestic accounts.

Since offshore banks are not government regulated to the same extent as domestic banks, they can offer a wider variety of investment options to companies and individuals looking for a higher rate of return than what is typically offered with US Mutual Funds.

HOW PATRIOT ACT, IRS, QUALIFYING INTERMEDIARY REQUIREMENTS AFFECT YOUR OFFSHORE ACCOUNT AND PRIVACY

One of the advantages of having an offshore bank account used to be the anonymity that was guaranteed with it. Unfortunately, following the terror attacks of 9/11 many offshore banks are volunteering any information requested by domestic governments if they suspect criminal activity.

The Patriot Act allows authorities to actually seize bank accounts and assets reportedly belonging to criminals. The Internal Revenue Service (IRS) has also initiated the Qualifying Intermediary Requirements which gives the government access to the names of all individuals receiving US-funded investment income. Offshore banks are working closer to authorities to adhere with stricter money laundering legislation, and these banks will often volunteer information to police if there is questionable activity in your account.

IS OFFSHORE BANKING TAX-FREE?

You should be aware that offshore bank accounts are not tax-free. While you may choose to withhold information from the IRS in an attempt to escape paying taxes, you are under legal obligation to report all income earned from foreign accounts with the exception of an annuity.

You may not be forced to pay taxes to the offshore bank for interest earned on your deposit, and they may choose not to disclose financial information to the US government. However, if it is discovered you committed perjury on your taxes the consequences will far outweigh the immediate benefits of evading taxes. With stricter laws being enforced due to threats of terrorist attacks, and the rise in money laundering for drug rings, it will become increasingly more difficult to hide funds in offshore accounts.

Consulting with a financial advisor may help you avoid legal problems associated with a poorly planned offshore bank account. Ideally, your account should offer competitive rates of return for your investments, competitive interest rates on loans, security, and confidentiality.

Author: Rocco Beatrice
Article Source: EzineArticles.com
Canada duty rates

1. It issues notes and coins. The Bank of England is the sole issuer of notes and coins in the UK. In theory you could take a £10 note to the Bank of England and ask for you equivalent sum of Gold. I don’t know whether they would take kindly to such requests but in theory that is how they maintain confidence in notes and coins as a medium of exchange

2. Managing the government’s debt. National Debt in the UK At the end of 2005/6 general government debt was £529.1 billion, equivalent to 42.1 per cent of GDP. [1]
To manage the government debt the bank of England sell bonds and gilts to the private sector. Usually bonds have a lifetime of about 30 years. In order to encourage people to buy government debt they need to offer an attractive interest rate. Interest payments on UK debt amount to nearly £30 billion a year

3. Managing Monetary Policy. In particular the MPC Monetary Policy Committee is responsible for changing interest rates in order to keep inflation within the governments target of CPI 2% +/-1. To achieve this inflation target the MPC meet every month and examine future inflation trends. If inflation looks to be increasing then they will vote to increase interest rates in order to dampen demand. They don’t directly set mortgage rates but indirectly they do influence mortgages through the setting of interest rates.

4. The Bank of England actually set the base rate of “repo” rate. This is a rate at which they lend to the commercial banks. They keep the banks short of liquidity so that they often have to borrow on this repo rate. If this repo rate changes then the commercial banks usually pass the changes on to their customers by changing there own interest rates.

5.. Acting as lender of last resort. If the commercial banks are short of cash then they go to the Bank of England who will be able and willing to lend them money. This is important for the banking system because it ensures the banks are never short of cash and so people have confidence in the banking system.

6. The Bank of England oversees the banking and financial system of the UK

[1] http://www.statistics.gov.uk/cci/nugget.asp?id=277

Author: Richard Pettinger
Article Source: EzineArticles.com
Smiling shark

I would argue that the most powerful man in the world is not the President of the United States but rather the Chairman of the Federal Reserve Ben Bernanke. He is the modern day EF Hutton…when he speaks, everyone listens – even the President.

The Federal Reserve was founded by Congress in 1913 as the central bank of the U.S. The function of the Fed is to conduct the nation’s monetary policy and regulate our banking institutions. Within the Fed is the Federal Open Market Committee. This committee consists of 12 members which includes seven members of the Board of Governors of the Federal Reserve System and the President of the Federal Reserve Bank of New York. The FOMC meets in person eight times per year and may meet by phone on other occasion. When major economic events occur, the FOMC may meet as they did after 9/11.

The FOMC achieves its fiscal objectives partially by setting the target for the federal funds rate which is currently at 5.25%. This rate is that which banks lend their deposits to other banks overnight. They do this to help other banks keep within the reserve requirements set by the Fed. The highest federal funds rate in the last 16 years was 8.0% back in 1990. It was at it’s lowest just recently when it bottomed out at 1%. The Fed also provides information on the economy by publishing a report called the “Beige Book”. This report is published eight times per year as well and is based upon anecdotal evidence gathered by each Federal Reserve Bank.

Here is how the Fed and Mr. Bernanke affect interest rates. They affect rates by lowering or raising the Federal Funds rate. There is a direct affect on short term interest rates like the prime rate and any kind of T-Bill rates of less than 5 years. Almost every bank mirrors the Fed with the prime rate they publish. In other words, as the Fed moves the Fed Funds Rate, banks move the prime rate. The prime rate right now is 3% higher than the Fed Funds Rate. So if the Fed raises the Fed Funds rate from its current level of 5.25% to 6.0%, then the prime rate would move from 8.25% to 9.0%. Most 2nd mortgages are based upon the prime rate, so as it moves so does the cost of credit to homeowners. Also, your credit cards are usually following the Fed when they move rates. You will find the least expensive credit cards when the Fed Fund rates are at their lowest.

The affect on long term rates are not as direct. If the markets perceive that the Fed is not being diligent against inflation then long term rates may rise. This is interpreted by the markets when the Fed Funds rate is lowered therefore attempting to stimulate the economy which could lead to inflation. This is the major reason that you may have noticed that 30 year mortgage rates have not increased dramatically over the last 2 years even though the Fed has raised rates 17 times. Long term rates will generally move the opposite way the Fed moves rates or at least move less dramatically, which is what we have seen over the last 2 years.

In a recent report released, it was stated that a weakening U.S. economy is setting the stage for lower interest rates. This was according to a UCLA Anderson Forecast. The forecast predicts real gross domestic product will rise no more than 2.7 percent next year, reflecting the weak housing market. As a result, the prediction is that the Federal Reserve Board will cut interest rates to stimulate business, says Edward Leamer, director of the UCLA Anderson Forecast. Leamer says he sees the Federal Funds rate falling to 4.5 percent by the fourth quarter of next year. Leamer also thinks housing starts will bottom out at an annual rate of 1.4 million in the second quarter of next year. As builders seek to sell inventory, new-home prices will fall to a low in the third quarter of 2007, down 10 percent from current levels, he says.

So if you believe what this report says you would think that now is the time to refinance and pull out the equity in your home because the value of your home is falling and you could loose your equity. The refinance would allow you to utilize your equity to do other things like home improvement or debt consolidation or even investment. Now if you are in the market for a new home, you may want to wait until September of this year to purchase so that you don’t over pay for that home.

The dilemma all of us face is that for every opinion there is a counter opinion. The only way to really know what direction you should go is to ask a local expert in mortgage lending or real estate. Take the information they give you and make the best decision for yourself. Rates will rise and fall whether or not you buy or refinance. The only time you really care about Mr. Bernanke or what is going on in the market is when you are looking to purchase or refinance. So, although he may be the most powerful man in the world, you probably don’t even care. The moral of the story is to find yourself local experts in whatever field you need information and not worry about the stuff or the people you can’t control.

Author: Ed Jeffry
Article Source: EzineArticles.com
Canada duty tariff

Who sets interest rates? In America, the Federal Reserve sets the national interest rates. In Canada, the Bank of Canada sets the target for the overnight rate. The Bank of England is the British equivalent to the Federal Reserve or the Bank of Canada. The Federal Reserve and the Bank of Canada set rates 8 times a year, and the Bank of England sets rates 12 times a year.

The target overnight rate which is set is a .5% margin: if it is 4.25-4.75% this means that banks will charge 4.75% interest on money they lend to other banks, and they will pay 4.25% on money deposited by other banks.

Each individual banking institution offers separate rates for different kinds of accounts. The banks choose their rates based on the national rates.

What affects interest rates?

Rates are raised in the short-term during expansions (when the economy is growing) to prevent the rise of inflation. Inflation is when you have too much money circulating, and so it costs more money make purchases. For instance, if there is a lot of money being created with no regulation, and the interest rates were not adjusted to help compensate, hypothetically, money could become essentially worthless. (Picture peasants in Russia with buckets of rubles trying to buy a loaf of bread.)

The government lowers interest rates when the economy is not doing so well. Lowering interest rates stimulates the economy because it encourages people to spend their money. It encourages them to borrow money (to put more money in circulation), and it discourages them from investing because their investments will not make overly large returns.

Canadian interest rates are linked to American interest rates, but they are not the same. Canada might have a different interest rate than the States, but Canada’s interest rate will be affected by the change in American interest rate.

How does the interest rate affect me?

When interest rates are high, as a consumer, this is a good time to invest money. It means that you will make more profit on the money that you choose to invest. Unfortunately, however, when interest rates are high, it is not a good time to borrow money. It means that you will have to pay back more in interest, which often means a longer loan period.

Having low interest rates means that it is not a great time to invest money. You will not make a high return on money you invest. Low interest rates, conversely, are what you want when you borrow money, because it means that you will have less money to pay back in the long-term.

What are the current trends in the market?

As of 2006, there seems to be an upward trend in interest rates. In 2004, interest rates hit a forty year low. They have been slowly but steady rising since then. The Bank of Canada has increased interest rates at least nine times since the lowest point in 2004, and the American Federal Reserve has made at least sixteen increases since that point.

Because, in 2006, it seems like the interest rates will rise, this is a good time to get a fixed-rate loan before the cost becomes prohibitive.

Author: Morgan James
Article Source: EzineArticles.com
Canada duty rate

Interest rates are charged to credit card holders based on certain rates. However, due to the changes in the economy and stock market, and sometimes due to changes in the laws that govern credit transactions, these rates change.

People usually see cards with rates that quickly change as variable rate credit cards, while those that “do not change” are fixed rate credit cards. But how can you really tell these two apart?

We must first understand the nature of rising and falling borrowing rates. The Federal Government Reserve Board increases or decreases the discount rate based on certain pointers in the economy.

This discount rate refers to the rate that the Fed Reserve charges a bank whenever it borrows money from the Fed Reserve when it is temporarily short of funds. As expected, especially when the Fed Reserve increases its discount rate, the banks pass this increase to its customers. In the case of credit cards, banks raise the prime rate, the most favorable interest rate charged on short term loans.

The Variable Rate plan uses indexes such as the prime rate or Federal Reserve discount rate. Once the interest rate equivalent to the index has been identified, the issuer will add points, or a margin, to the index to determine the rate that will be charged to the customer. When the index, e.g. the prime rate, changes, the interest rate of a variable rate credit card correspondingly changes. If the prime rate increases by 1%, the interest rate also increases by 1%.

The Variable Rate plan is usually customer friendly when the prime rate falls. However, banks keep a “floor rate”, or a minimum interest rate, to maximize their profits whenever the prime rates fall. If the prime rate is below the floor rate, the interest rate of the credit card will be based on the floor rate.

If the prime rate increases above the floor rate, it will be the basis of the card’s interest rate. When the prime rate or index increases, this allows the bank to fully pass this increase to the customer.

On the other hand, the rates for Fixed Rate Plans are not directly affected by the changes in the index or prime rate. If the prime rate increases or decreases, the fixed rate usually stays the same. If the fixed rate changes, it is only a fraction of the actual change in the index.

If fixed rates will be raised, the Truth In Lending Act provides that a 15-day notice should be released before actually increasing the rate. Some states have laws that require more than a 15-day notice.

Take not that there isn’t any real “fixed rate” credit card. Why? Because whether we like it or not, banks have to modify their interest rates according to the prevailing index rate. Even though a card has a fixed rate, it will still change on certain occasions, unlike the variable rate card, which regularly changes its rates. And fixed rates may also increase periodically, say annually. If the index rate becomes very volatile, fixed rate credit cards are inevitably changed to variable rate cards.

To determine whether a variable rate card or fixed rate credit card is suited for you, start by reading the Rate Reports that are released by expert financial analysts. These reports will give you a good picture, if not a thorough understanding, of the current lending rates. Then, carefully examine the details and terms of the bank’s credit card plans.
Take note of the maximum and minimum rates that the bank may charge you. If you find that the minimum variable rate of the bank is higher than market interest rate due to a falling trend, you may want to find another bank or lender.

Author: Morgan Hamilton
Article Source: EzineArticles.com
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An interesting question to be sure. Naturally, when investing funds into Certificates of Deposit (CDs), you want to know how much you are going to earn. If you are receiving your funds monthly, then the APR (Annual Percentage Rate) is what you are interested in. If you are allowing the interest to compound, the APY (Annual Percentage Yield) is what is important to you. And what about the rate for zero-coupon or discounted CDs? Read on.

First, ask the bank or your broker what both rates are. Many banks will just post their APY. You might have seen some adds, such as “1-Year CD Rate @ 5.21% APY”. And you’re thinking, “WOW! I’m going to earn $5,210.” If I invest $100,000 and receive $434.17 a month. I can finally afford that Camry lease. Not so fast. If you are receiving the interest monthly, the monthly figure depends on the compounding of the bank. Let’s assume the bank compounds monthly; that makes the APR about 5.09%. Your overall earnings will be $5,090 and monthly that is $424.17 a month (better stick with the Corolla).

Now for the second scenario. You don’t need the income monthly so you can let your interest compound. This means that on a fixed frequency, the interest is added to your principal and also earns interest. As a result, after each compound, more money is earning interest. Bank A is offering a 1-Year CD rate of 5.10% APR and Bank B is offering a rate of 5.15% APR. Certainly you are going with Bank B, right? Not so fast. Bank A compounds daily and Bank B compounds semi-annually. This means that for Bank A, the daily interest earned is added to the principal and thus the interest is earning interest much more often. With semi-annual compounding, the interest is only added to the principal twice (every six-months). So what is the difference? The APY for Bank A is 5.232% and for Bank B it is 5.216%. You earn more on a compounding basis ($5232 vs. $5216) with Bank A. In addition, some banks don’t compound at all, especially when it comes to Jumbo CDs. If we use the same banks and Bank A compounds and Bank B doesn’t, the difference is even more significant ($5232 vs. $5150).

Finally, what is a zero-coupon or discounted CD? This is a CD where the principal is discounted and interest is paid at maturity. They are designed to mature at $100,000. For example, you invest $85,000 and when it matures, you receive $100,000; terms vary but for our example let’s use 42-months. That sounds real nice doesn’t it? After all, you’ll earn $15,000 (almost $5000 a year) and the CD was kept under the FDIC $100,000 insurance limits the whole time. But what is your rate? Make sure your broker or bank quotes you the Bond Equivalent Yield (BEY) and not the Average Rate of Return. The BEY takes into account the time-value of money, and gives you a rate that is based on the present value of your investment. The BEY calculation is very involved to do manually, but there is a simple calculation for the APY which will be a good check on what the broker is quoting you. The APY will be about 5 to 10 Basis Points (0.05% – 0.10%) higher than the BEY. For our example, if you were just quoted the Average Rate of Return, you would have been quoted 5.04%. Now for the APY calculation. The equation is (Future Value / Price) to the power of (365/# of Days until Maturity) – 1. This returns 4.747%. The BEY is about 4.69%. This means that an investment that cost you $85,000 and returns $100,000 in 42-months is worth a 4.69% today. Now you can compare apples to apples.

Here is an example with numbers. We already know that the zero is going to pay you $15,000 after 42-months. But, if you take the same $85,000 and invest into a CD with an APR of 4.985% and APY of 5.10% (CD compounds monthly) for 42-months you will earn $16,166.22. More importantly, much of the time the difference in the APY is even greater for similar terms. The morale of the story; know what your needs are and compare rates appropriately.

Author: Chris Duncan
Article Source: EzineArticles.com
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