European Central Bank’s Lower Interest Rates – Stimulating Euro zone Economy

Due to the recent measures to of stimulating European economy, The European Central Bank has proclaimed low interest rates and cheap loans. European Central Bank’s Lower interest rates are set to help encourage banks in lending money to business and company owners, at low rates, instead of holding onto money and earning zero interest.

It is true that the Federal Reserve under Ben Bernanke and Janet Yellen have engaged in unusual and emergency measures to stimulate the American economy. They are printing money in quantitative easing to help the stock market go up and some of that money is going into European markets. They are doing this with assistance of the ECB.

By these unconventional measures, stimulating euro zone economy, European Central Bank has become first major bank to use negative interest rates, by also lowering benchmark rates to 0.15 percents, which is almost double off original step percentage. Lower interest rates are rather uncommon and usually an indicator that economy market has lived to be in very bad shape. When bank is not in envious position, declining loans to independent businesses and small and medium companies often occurs.

Mario Dhagi has announced that European Central Bank’s Lower Interest rates could last in form of commercial bank rates for four more years. Negative rates work in a way that makes possible for banks to borrow more money from European Central Bank by giving more loans to business owners and small and medium companies. However, this solution can’t make up for inflation state on long tracks, so in the next four years more conventional measures should be considered.

Deflation is becoming more visible, as life standard in Europe is decreasing, but currency rate have fell to almost 1.4 US$, which makes it the lowest rate in five months. Deflation is still not a real-life problem to majority of citizens, but if the European Central Bank’s lower interest rates do not fix the economy shape, other serious problems might occur. Problems which might occur in the future, caused by deflation and bad economy state, are low consumption, increased unemployment rates and even investors’ retreat.

In order to avoid and fix Greece and Portugal scenario of increased unemployment and economical chaos, European Central Bank has to make every effort, but it also needs to be stressed out that not everything is in ECB hands. Commercial banks and government in European zone and affected areas and countries should also make every effort in fixing the bad economy state and step up in making smart decisions in order to recover the euro zone to its previous shape. For now, European Central Bank’s lower interest rates should be effective as temporary solution until more efficient measure appears.

Posted in economy advice | Comments Off

The Diversified Economy in Italy

The Italian economy is a diversified one with developed infrastructure and high GDP growth per capital. According to IMF, Italy is the fourth largest country in Europe and the eight largest countries in the world in terms of nominal GDP and the eleventh largest in terms of purchasing power parity.

Italy is a member of OECD, European Union, and the G8 industrialized nations. It is estimated that the country’s economy will grow 0.5% in 2014, 1.16% in 2015, and 1.26% in 2016.

1970 saw a period of social, political, and economic turmoil in Italian history. There was a high rise in unemployment, and by 1977 more than 800, 000 people under 24 were unemployed. The increase in the price of oil from 1973 to 1979 also affected their economy as inflation rose to a greater level. Their budget deficit became intractable and permanent, which is higher than any industrialized nation. The country’s currency (the lire) lost value consistently as the gross domestic product continued to drop.

This recession continued until in the 1980s when several governmental policies were set, which lowered inflation rate, steadied the economic growth, brought a tighter budget and deficit, and reduced the cost of public spending.
But the unemployment rate was still high. However, as the foreign exchange was being liberalized within that period, the economy grew rapidly and gradually left the economic recession.

The global economic crisis in 2008 hit the Italian economy very had as it shrunk by 6.8% from 2007 to 2011. The country’s public debt stood at 115% of Gross Domestic Product in 2010, according to Eurostat., making it the second largest debt ration asides Greece (with 127%).

With the public debt measures initiated in 2010, the country targeted a budget deficit of 2.9% and 2.7% in 2011 and 2012 respectively. Italy’s weakening economic growth prospects means that further downgrades might still occur. Their economy was even rated low by two rating agencies: Moody and Standard & Poor sovereign debt rating. But the Italian government has taken measures to come out of this crisis. Different austerities measures have been adopted by the Italian government to swerve away from the economic turmoil that have seen the economy lose grounds among world economic superpowers. There have been fiscal and monetary policies by the government to cushion the effect of the economic recession witnessed over the years. Currently, the Italian economy is gradually picking pace and returning to the previously vibrant state it was known for.

Posted in economy advice | Comments Off

Most Popular Indexes; the Dow Jones Average has 30 Stocks in It

The Dow Jones Average has 30 stocks in it; 30 large-cap blue chip companies which are mostly, household names like General Motors, The Coca-Cola Co, Nike Inc, and IBM among others. The Dow Jones Industrial Average (DJI) is an average of the price of these 30 stocks. The average is computed by taking the average price of the 30 stocks and dividing that average by a number known as the divisor. If the Dow Jones goes up 50 points, it means that to buy these stocks, at closing time of the market, it would cost $50more than yesterday at the same time.

These companies generate quite a lot of revenue each year; reducing the business risk of the companies that make up the index. Investing in the DOW has always been a good way to make money and the DOW has returned an average of 13% over the last 20 years. As an example, if you had invested $10,000 in a DOW index fund all those years ago, you could be looking at some $110,000 today.

The Values of 30 Companies Added Together

The Dow Jones Industrial Average, created in 1896 and the second oldest stock market index in the United States, is certainly one of the most followed stock market indexes in the world; watched by millions every day. Most of the DJIA’s 30 component companies are made up of companies who manufacture consumer- and industrial goods; while the rest are companies who deal in finances, information technology and others. The aim of the Dow Jones Industrial Average is to provide a view of the stock market and also the U.S. economy.
Stocks are investment vehicles, but when looking at the performance of the Dow, bear in mind that some investors see the Dow as a volatile index. The Dow Jones Average has 30 stocks in it and all the companies that make up the DJIA are very well established and this means that their business risk is lower as bankruptcy is not staring them in the face. In spite of this, the stock price fluctuates and investment products which replicate the performance of the Dow can experience short-term gains and losses.

There are different ways to invest in the DOW; such as Pros hares Ultra DOW 30, which is an Exchange Traded Fund (ETF) which doubles the performance of the DOW. This means that if the DOW goes up 6%, this ETF will go up about 12%. If the DOW goes down 6%, the risky part is that the stock will go down 12% or so.

Consistent Performance from the DOW

While the Dow Jones Average has 30 stocks in it, these 30 stocks are representative of the stock market in the U.S. as a whole, providing an indication of how specific markets performed during the day.

Posted in finance advice | Comments Off