Finance and Economy

Information on Bangladesh Share Market

2010-12-13T17:33:00.001+06:00

Information on Bangladesh Share Market: First Janata Bank Mutual FundIPO Lottery Result (2...

2010-08-29T13:46:00.000+06:00

Information on Bangladesh Share Market: First Janata Bank Mutual FundIPO Lottery Result (2...: "First Janata Bank Mutual FundIPO Lottery Result (2010) Bank Code Branch Code Lotter..."

Information on Bangladesh Share Market: First Janata Bank Mutual FundIPO Lottery Result (2...

2010-08-29T13:45:00.000+06:00

Information on Bangladesh Share Market: First Janata Bank Mutual FundIPO Lottery Result (2...: "First Janata Bank Mutual FundIPO Lottery Result (2010) Bank Code Branch Code Lotter..."

ICB 3rd NRB Mutual Fund IPO Result is available here

2010-04-27T15:40:00.001+06:00

ICB 3rd NRB Mutual Fund IPO Result is available here

ICB 3rd NRB Mutual Fund IPO Result is available here

GENERAL

NRB

MUTUAL FUND

REFUND WARRANT

For more Please bookmark this blog.....

A new blog started for information on IPO of RAK Ceramics Bangladesh

2010-04-22T02:41:00.000+06:00

RAK CERAMICS BANGLADESH IPO INFORMATION

Download Original RAK CERAMICS IPO form

2010-04-18T15:09:00.000+06:00

Downloadn RAK Ceramics IPO form from here...........

RAK CERAMICS FORM

Information on Bangladesh Share Market: IFIC 1st mutual fund IPO result is available

2010-03-09T14:24:00.000+06:00

Information on Bangladesh Share Market: IFIC 1st mutual fund IPO result is available

For more Please bookmark this blog.....

IPO result of IFIC 1st mutual Fund will be available here

2010-03-08T10:48:00.000+06:00

The Scheule for IFIC Bank First Mutual Fund Lottery
Date & Time

March 09, 2010

(10:30 AM)

Venue
Bangabandhu International Conference Centre

Lottery Download link

1. Bank Code
2. General Public
3. NRB
4. Refund Warrant

Information on Bangladesh Share Market: ACI ZERO COUPON BONDS RESULT DECLARED

2010-03-03T17:18:00.000+06:00

ACI ZERO COUPON BONDS RESULT DECLARED

For more Please bookmark this blog.....

Phonix 1st Mutual Fund prospectus is available

2010-02-19T13:28:00.001+06:00

Phonix 1st Mutual Fund prospectus is available. Download it from following link.

Phoenix Finance 1st Mutual Fund

R. A. K Ceramics Prospectus is available for download.

2010-02-19T12:51:00.000+06:00

Please download R. A. K Ceramics Prospectus is available for download. Follow the Download Link.

R. A. K. Ceramics

R. A. K. Ceramics : IPO will be on Book Building : coming Soon

2010-02-17T13:28:00.001+06:00

Important News-R.A.K. Ceramics BD Ltd.

R.A.K. Ceramics Bangladesh Ltd. has informed that it has decided to commence bidding from March 01, 2010 to March 03, 2010 by the eligible institutional investors (EII)(cont)

cont-Important News-R.A.K.Ceramics BD

for price discovery of further issue of 34,510,000 ordinary shares through IPO under book building method.(end)

Phoenix Finance 1st Mutual Fund: Froms available here

2010-02-13T15:28:00.000+06:00

Subscription Open: March 07, 2010
Subscription Close: March 11, 2010
For Non Resident Bangladeshi: March 07, 2010 to March 20, 2010

For Prospectus and Form always keep touch with this blog. Mutual Fund Review Download link is as

Phoenix Finance 1st Mutual Fund:

ACI release details on ZERO COUPON BONDS to clarify their IPO

2010-01-30T10:37:00.000+06:00

Microsoft sees 60% jump in profit, boosted by Windows 7

2010-01-29T12:36:00.002+06:00

Microsoft launched Windows 7 in October last year

Microsoft has reported a 60% jump in profit, thanks largely to "exceptional demand" for Windows 7.

Net profit came in at $6.66bn (£4.13bn) for the three months to 31 December 2009, up from the $4.18bn it made in the same period a year earlier.
It also reported record revenues of $19.2bn, which comfortably beat analysts' forecasts.
"We are thrilled by the consumer reception to Windows 7," said Kevin Turner, chief operating officer.
"This is a record quarter for Windows units."
Microsoft released Windows 7 in October last year.
'Outstanding'
Windows 7 has proved to be Microsoft's best-selling operating system to date after the disappointing Vista.

The online business came in line and the only business shy of expectations was Xbox

Brendan Barnicle, Pacific Crest Securities

Strong festive trading at Amazon

Microsoft was helped by a rebound in personal computer sales in the run-up to Christmas.
The company's results are closely tied to computer sales because its two most profitable divisions make the Windows Operating System and Office business software.
"These are outstanding numbers," said Brendan Barnicle from Pacific Crest Securities.
"The upside was in the Windows business and service and tools, and Office business. The online business came in line and the only business shy of expectations was Xbox."
Shares in Microsoft rose 25 cents, or 0.9%, to $29.41 in after-hours trading.
Reporting season
The company did not make any specific profit or sales forecasts, after making the decision to stop doing so in January 2009, citing market volatility.
Microsoft is the latest technology company to report earnings results.
Yahoo and Apple both announced higher profits earlier this week, while Google reported strong figures last week.
However, Nintendo saw a near 10% fall in profits after a slowdown in sales of its Wii games console.

Source :BBC NEWS

ACI zero coupon bonds form is available .....

2010-01-27T15:14:00.000+06:00

Download ACI zero coupon bond form from Following link.

ACI ZERO COUPON BONDS FORM

প্রথম আলো - পুঁজিবাজারে বেশ কয়েকটি দুষ্ট কোম্পানি রয়েছে: সংসদে অর্থমন্ত্রী

2010-01-26T22:18:00.001+06:00

প্রথম আলো - পুঁজিবাজারে বেশ কয়েকটি দুষ্ট কোম্পানি রয়েছে: সংসদে অর্থমন্ত্রী

Posted using ShareThis

What is Price-Earning Ratio ?

2010-01-21T17:30:00.000+06:00

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple".

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.

The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.

It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number.

What is Earning Per Share (EPS) ?

2010-01-21T17:27:00.000+06:00

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.

Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.

Earnings per share is generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio.

For example, assume that a company has a net income of $25 million. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 million is deducted from the net income to get $24 million, then a weighted average is taken to find the number of shares outstanding (0.5 x 10M+ 0.5 x 15M = 12.5M).

An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.

List of Recent IPO Results

2010-01-20T13:10:00.000+06:00

Please follow the links of result of IPO published recently

List of Recent IPO Results

ACI DECLARES 20% CONVERTIABLE ZERO COUPON BONDS

2010-01-19T19:16:00.000+06:00

In another word A zero-coupon bond (also called a discount bond or deep discount bond) is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity. It does not make periodic interest payments, or have so-called "coupons," hence the term zero-coupon bond. Investors earn return from the compounded interest all paid at maturity plus the difference between the discounted price of the bond and its par (or redemption) value. Examples of zero-coupon bonds include U.S. Treasury bills, U.S. savings bonds, long-term zero-coupon bonds, and any type of coupon bond that has been stripped of its coupons.

In contrast, an investor who has a regular bond receives income from coupon payments, which are usually made semi-annually. The investor also receives the principal or face value of the investment when the bond matures.

Some zero coupon bonds are inflation indexed, so the amount of money that will be paid to the bond holder is calculated to have a set amount of purchasing power rather than a set amount of money, but the majority of zero coupon bonds pay a set amount of money known as the face value of the bond.

Zero coupon bonds may be long or short term investments. Long-term zero coupon maturity dates typically start at ten to fifteen years. The bonds can be held until maturity or sold on secondary bond markets. Short-term zero coupon bonds generally have maturities of less than one year and are called bills.

Prospectus of ACI ZERO COUPON BONDS

APPLICATION FORM IS AVAILABLE : IFIC Bank declares 1st mutual fund of 120 crore

2010-01-18T18:36:00.003+06:00

IFIC Bank declares 1st mutual fund of 120 crore. Following are schedule of that IPO

The Scheule for receiving Initial Public offering(IPO) Units Application forms

For Resident Bangladeshi
February 7, 2010 to February 11,2010 (09:00 AM to 04:00 PM)
Bankers to the issue as mentioned in application From

For Non-Resident Bangladeshi's subscription closes on February 20,2010 (By Post office/Courier service only). Subscription sent by Post/Courier will be received in the Company's Head office only.

Following are link for downloading Forms and prospectus

IFIC BANK 1st MUTUAL FUND

DBH 1st Mutual fund IPO Lottery Result : Download it

2010-01-14T13:14:00.005+06:00

Following are Download link of DBH 1st Mutual fund

IPO Lottery Result :

1. Bank and Branch Code

2. IPO RESULT FOR General Public

3. IPO Result for NRB

4. Refund Warrant Distribution List.

5. Mutual Fund Lottery List

all above in a Download Link is :

DBH 1st Mutual fund IPO RESULT.

IPO Result of Prime Bank 1st Mutual Fund : Download it from here

2010-01-12T16:56:00.000+06:00

IPO Result of Prime Bank 1st Mutual Fund : Download it from here

Beautiful wild Life - 6

2010-01-07T21:26:00.001+06:00

Beautiful wild Life - 6

Courier Service Name of R. N. Shipping Mills Ltd

2010-01-07T13:52:00.000+06:00

Courier Service Name of R. N. Shipping Mills Ltd

ACI declare zeo coupon convertible Bonds for Bangladesh Share Market

2010-01-07T10:31:00.000+06:00

Zero Coupon bonds

In finance, a convertible note (or, if it has a maturity of greater than 10 years, a convertible debenture) is a type of bond that the holder can convert into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price. It is a hybrid security with debt- and equity-like features. Although it typically has a low coupon rate, the instrument carries additional value through the option to convert the bond to stock, and thereby participate in further growth in the company's equity value. The investor receives the potential upside of conversion into equity while protecting downside with cash flow from the coupon payments.

From the issuer's perspective, the key benefit of raising money by selling convertible bonds is a reduced cash interest payment. However, in exchange for the benefit of reduced interest payments, the value of shareholder's equity is reduced due to the stock dilution expected when bondholders convert their bonds into new shares.

a zero-coupon bond issued by a corporation which can be converted into that corporation's common stock at a certain price, or a zero-coupon bond issued by a municipality which can be converted into an interest-bearing bond under certain circumstances. also called split coupon bond. [For more on Covertible Bonds Please visit http://en.wikipedia.org/wiki/Convertible_bond ]

In Bangladesh, for the first time ACI declare zero coupon convertible bonds for local Stock Market. It's RPO will start on 31st January , 2010.

Details has been given in scanned images.

Dhaka Insurance IPO Application Status : DOWNLOAD Result

2010-01-04T22:17:00.004+06:00

Dhaka Insurance Limited (Subscription Open: 06.12.09, Close: 10.12.09 )

Nature of Business Insurance
Subscription Open December 06, 2009

Subscription Close December 10, 2009

For Non resident Bangladeshi December 06, 2009 to December 19, 2009

Offer Price (Tk.) 120.00
Face Value (Tk.) 100.00
Market lot (Share) 50
Sponsors Portion (Share) 600,000
Public Offer (Share) 900,000
Total Issued Shares 1,500,000
Total Paid up Capital (after IPO) Tk. 150,000,000.00

EPS (as per prospectus) 33.87 (as on 31.12. 2008)
NAV per share (as per prospectus) 187.94 (as on 31.12 . 2008)

Website www.dhakainsurance.com

The Present IPO STATUS of Dhaka Insurance is as follows :-

the primary status of the IPO of Dhaka Insurance Ltd. is: Total amount of subscription (excluding NRB) =Tk.5,369,928,000 & Total No. of application=785,256. Total amount received from NRB =Tk. 151,764,000 & Total application from NRB=25,249.

ALL RESULT WILL BE DOWNLOADED FROM HERE
1. GENERAL
2. NRB
3. BANK AND BRANCH CODE
4. REFUND WARRANT SCHEDULE

CLICK LINK FOR ALL DHAKA INSURANCE IPO RESULT DOWNLOADING..........

ALL RESULT WILL BE DOWNLOADED FROM HERE

Trust Bank 1st Mutual Fund : IPO LOTTERY RESULT

2010-01-03T15:03:00.000+06:00

IPO LOTTERY DOWNLOAD LINK

As Per SEC declaration :
All concerned are hereby informed that the IPO lottery program of Trust Bank First Mutual Fund will be conducted on 3 January 2010 at 10:30 am at Harmony Hall, Banladesh-China Friendship Conference Center, Sher-E-Bangla Nagor, Agargaon,Dhaka.
~~~~
Trust Bank Limited Mutual Fund : IPO Lottery result has been published. I got complete lottery sheets in pdf files. For sharing with friend of Bangladesh, I have uploaded this too in rapidshare and giving the links to my friends.
Download it from following links. you may also get regular IPO information from my blog site. In my blog zone "Share Your Ideas" You may get regular updates on other financial news from Bangladesh and regular important news from all over the world.

Download Link is as;

http://rapidshare.com/files/329604765/Trust_Bank_Mutual_fund.rar.html

Latest Cricket News

2010-01-03T11:45:00.001+06:00

Result of R. N. Spinning : Download

2009-12-29T11:50:00.000+07:00

Dont' Worry !

IPO Result of R. N. Spinning is just here in a zip file. Here you will find -

1. General Result
2. NRB Result
3. Mutual Fund Result
4. Bank Branch Code
5. Distribution List of Reffund warrant. So Don't Hesitate. Just click and get within moments

IPO RESULT OF R. N. SPINNING MILLS.

Micro Credit and Grameen Bank

2009-10-09T17:20:00.001+07:00

Microcredit is the extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh.^[1] In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth, even though almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun. The United Nations declared 2005 the International Year of Microcredit.

Source : Wiki

CBOT Soy Review: Bounce Off Early Lows; Fundamental Support

2009-05-12T11:30:00.000+06:00

CBOT Soy Review: Bounce Off Early Lows; Fundamental Support

Soybean futures on the Chicago Board of Trade ended higher Monday, managing to recover from an early setback on bullish underlying fundamentals.

Read also in category "Soy market news":

MARKET TALK: CBOT Soy Pdts End Mixed, Meal Up On Spreads

CBOT soy product futures ended mixed, with soymeal climbing on support from a turnaround in soyeans and adjustments in the meal/oil spread relationship, analysts said.

MARKET TALK: CBOT Soybeans End Higher, Bounce Off Early Lows

Soybean futures on CBOT ended higher Monday, managing to recover from an early setback on bullish underlying fundamentals.

US Cash Grain Review: Planting Delays May Boost Corn Basis

Mixed prices prevailed Monday, as the U.S. cash grain trade mulled the potential impact of continued planting delays on domestic grain supplies.

Exchange: Argentina's Farmers Have Sold Over Half Of Soy Crop

Farmers have already sold about half of Argentina's 2008-2009 soy crop, with demand strong on tight supplies due to extensive drought damage.

Brazil Cos Forming New Committee To Study Soy - Report

Private companies and local research organizations are forming the Brazilian Strategic Soy Committee, or CESB, to study issues related to soy such as productivity, local newspaper Valor Economico reported Monday.

European Veg Oil PM Soft Oil Prices - May 11 at 1745 local time

Lowest known offers at 1745 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

Brazil Soy Export Premiums And Discounts - May 8

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.

Argentina Port Trade-Weighted Grain, Oilseed FOB - May 8

Free-on-board prices in U.S. dollars per metric ton.

European Veg Oil AM Soft Oil Prices - May 11 at 1330 local time

Lowest known offers at 1330 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

MARKET TALK: India Soybean Futures Down 1.3% On Profit-Taking

India NCDEX June soybean contract provisionally ends down 1.3% at INR2,703.50/100 kgs on profit-taking, weak domestic demand; market eyeing USDA supply-and-demand report later today for fresh cues.

Asia Grain Outlook: Corn, Soybean May Rise On USDA Report

Corn and soybean prices are likely to be higher over the next few days, as analysts expect a bullish crop report by the U.S. Department of Agriculture Tuesday.

China Soybean Futures Fall Along With Soymeal On Flu Concerns

Soybean futures traded on the Dalian Commodity Exchange settled lower Monday along with a tumble in soymeal prices as the mainland confirmed its first case of swine flu

MARKET TALK: India Soybean Futures Down 0.9% On Weak Demand

India NCDEX June soybean contract down 0.9% at INR2,714/100 kgs on reduced domestic, overseas demand.

MARKET TALK: India Soybean Futures Likely Dn;Weak Foreign Mkts

India June NCDEX soybean contract likely to open weak, tracking overseas soybean prices, weak technicals, says Badruddin Khan, analyst with Angel Commodities.

MARKET TALK: China Soymeal Futures Tumble On Swine Flu Worries

China's soymeal futures traded at Dalian Commodity Exchange fall sharply as country reports mainland's first suspected case of swine flu Sunday.

Read more on Palmoil.com homepage

MARKET TALK: CBOT Soy Pdts Stumble With Soybeans

2009-05-08T11:29:00.000+06:00

MARKET TALK: CBOT Soy Pdts Stumble With Soybeans

CBOT soy product futures settled lower, stumbling in step with declines in soybeans.

MARKET TALK: CBOT Soybeans Stumble: China Rumors Weigh

CBOT soybean futures ended lower, backpedaling from initial advances on speculative selling and talk of China canceling purchases of soybeans.

MARKET TALK: CBOT Soybeans Tumble On China Talk

Talk circulating the trading floor of China canceling some cargoes of U.S. soybean purchases and shifting some other sales to the 2009-10 marketing year attracted speculative selling in CBOT soybean futures, a CBOT floor analyst says.

Argentina Ag Agency Sees 08-09 Soy Crop Just 33M Tons - Report

Sources in Argentina's Agriculture Secretariat expect the 2008-09 soy crop to total a dismal 33 million metric tons, according to a report in local daily Clarin Thursday.

Technical Special: CBOT Soybean Bulls Have Strength, Momentum

Chicago Board of Trade July soybean futures on Thursday hit a fresh seven-month high of $11.31 a bushel.

European Veg Oil PM Soft Oil Prices - May 7 at 1745 local time

Lowest known offers at 1745 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

Brazil Soy Export Premiums And Discounts - May 6

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.

Argentina Port Trade-Weighted Grain, Oilseed FOB - May 6

Free-on-board prices in U.S. dollars per metric ton.

Brazil's IBGE Puts 08-09 Soy Crop At 57.6M Metric Tons

The agricultural survey group of Brazil's Census Bureau, or the IBGE, on Thursday put the 2008-09 soy crop at 57.6 million metric tons.

Brazil New Soy Seen 4% Lower At 57.6M Tons On Year - Conab

Brazil should harvest 57.6 million metric tons of soybeans in the new 2008-09 crop year, the National Commodities Supply Corp, or Conab, said Thursday.

MARKET TALK: India Soybean Futures Down; Weak Export Demand

India June NCDEX soybean contract provisionally ends down 0.5% at INR2,772/100 kg on sluggish export demand.

China Soybean Futures Settle Tad Up; Concerns Of Correction

Soybean futures traded on the Dalian Commodity Exchange settled slightly higher Thursday, supported by an overnight rally on the Chicago Board of Trade.

MARKET TALK: India Soybean Futures Tad Up On Bargain Buying

India NCDEX June soybean contract up 0.1% at INR2,788.50/100 kg on bargain buying, tracking price uptrend overseas.

MARKET TALK: India Soybean Futures Likely Up On Fresh Buying

India June NCDEX soybean contract likely to open higher on fresh domestic buying.

Read more on Palmoil.com homepage

Palm Oil : Latest News

2009-04-29T22:13:00.000+06:00

Asian Crude Palm Oil Ends Up; Apr Exports May Touch 1.2M Tons

Crude palm oil futures on Malaysia's derivatives exchange ended higher Wednesday in volatile trade, recovering from intraday losses on expectations of steady exports this month of almost 1.20 million metric tons.

Read also in category "Palm market news":

Malaysian Cash Market Prices For Palm Oil - April 29 at 1000 GMT Wednesday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Wednesday, supplied by commodity broker Matthes & Porton Bhd.

Indonesian Physical Palm Oil Prices April 29

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

MARKET TALK: BMD CPO Futures Recover On Steady Exports

BMD CPO futures up on likely steady exports; traders expect Malaysia's palm oil exports may touch almost 1.20 million tons in April, little changed on month

Malaysia April Palm Oil Exports Likely 1.195M Tons - Traders

Malaysia's palm oil exports in April are likely to be around 1.195 million tons, close to month-ago levels, trading and shipping executives said Wednesday.

Indonesia Astra Agro Sells 1,000 Tons CPO Wednesday

Indonesia's PT Astra Agro Lestari Wednesday said in a statement it sold 1,000 metric tons of crude palm oil offered in an auction.

Indonesia PTPN Sells 2,500 Tons CPO At Auction Wednesday

Indonesia's PT Perkebunan Nusantara Wednesday said in a statement it sold 2,500 metric tons of crude palm oil offered in a government auction.

MARKET TALK: Swine Flu Likely Positive For CPO Prices M/T - UOB

Swine flu could be positive for palm oil prices in medium term, says UOB KayHian.

MARKET TALK: Malaysia Cash Palm Oil Dn As Buyers On Sidelines

Malaysia's cash palm oil prices fall on lack of buying interest.

MARKET TALK: Swine Flu May Actually Boost Palm Oil Prices - RBS

Despite traders putting yesterday's drop in crude palm oil (CPO) futures down to worries of impact in swine flu on demand for feed grains and oil seeds, RBS says swine flu may actually boost palm oil prices.

MARKET TALK: BMD CPO Futures Tad Lower On Favorable Weather

BMD CPO futures trading sideways; open higher, then move into negative territory as investors liquidate positions, expecting increase in oil palm harvesting this week on fair weather.

MARKET TALK: Malaysia Dry Weather May Weigh On CPO Prices

Isolated rains, thunderstorms likely amid fair weather this week, says spokesperson in Malaysian Meteorological Department.

Dry Weather To Boost SE Asia Oil Palm Harvest - Exec

The oil palm growing regions of southeast Asia will likely see mostly dry weather this week, according to Chicago-based meteorologist Mike Tannura.

Read more on Palmoil.com homepage

Palm Oil : Latest News

2009-04-24T09:48:00.002+06:00

CBOT Soy Review: Up On Outside Markets, Fundamentals Support

Soybean futures on the Chicago Board of Trade ended higher Friday, finding support from outside markets and underlying demand fundamentals.
MARKET TALK: CBOT Soy Pdts Finish Up; Climb With Beans

CBOT soy product futures ended higher Friday, climbing in unison with advances in soybeans.
MARKET TALK: CBOT Soy Ends Higher On Fundamental Strength

CBOT soybean futures ended higher, finding support from outside markets and underlying demand fundamentals.
MARKET TALK: Brazil's Soy Trade Slows On Unfavorable Forex

Brazil's soybeans trade has tapered off Friday due to unfavorable forex conditions, says a trader at a major U.S. exporter.
MARKET TALK: CBOT Soy Sustains Strength As Outsides Buoy

CBOT soy futures sustain strength, supported by outside markets and bullish fundamentals.
MARKET TALK: CBOT Soy Hold Firm; Fundamentals, Outsides

CBOT soybean futures are holding firm, finding stability after a choppy start. Overall activity is subdued, but futures remain underpinned by bullish demand fundamentals, and supportive outside market influences, analysts say.
European Veg Oil PM Soft Oil Prices - Apr 24 at 1745 local time

Lowest known offers at 1745 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:
MARKET TALK: CBOT Soy Turns Higher After Choppy Start

CBOT soybean futures are posting modest gains after a choppy start that saw prices test both sides of unchanged levels.
US Cash Grain Outlook: Corn, Wheat Prices Hit 1- To 2-Week Highs

Climbing corn and wheat prices had reached one- to two-week highs on the U.S. cash market Friday, bolstered by slack farmer selling, improved export sales, and growing concern about spring planting delays that threaten to extend into May.

CBOT Soy Outlook: Down 1-3c; Consolidating Into Weekend

Chicago Board of Trade soybean futures are expected to start Friday's day session with modest declines as the market consolidates heading into the weekend.
MARKET TALK: Canadian Soybean Area To Rise In 2009, Canola Dn

Oilseed data from Statistics Canada was mixed, with soybean acreage seen increasing but canola area seen falling.
USDA Says 120,000 Tons Of Soybeans Sold To Unknown In 09-10

The U.S. Department of Agriculture on Friday announced private export sales of 120,000 metric tons of soybeans for delivery to unknown destinations in the 2009-10 marketing year.

Brazil Soy Export Premiums And Discounts - Apr 23

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.
Argentina Port Trade-Weighted Grain, Oilseed FOB - Apr 23

Free-on-board prices in U.S. dollars per metric ton.
MARKET TALK: CBOT Grain, Soy Consolidate Overnight

CBOT grain and soybean futures were steady to lower in overnight action.
India Soyoil Prices Fall On Expectations Of Higher Imports

Indian soyoil prices fell during the week ended Friday on expectations of higher imports, but palm oil prices moved up tracking firm overseas markets, traders said.
MARKET TALK: India Soybean Futures Down 1.3% On Profit-Taking

India May soybean contract provisionally ends down 1.3% at INR2,765/100 kg, falling from INR2,800 intraday high on profit-booking, high arrivals in local markets.
European Veg Oil AM Soft Oil Prices - Apr 24 at 1315 local time

Lowest known offers at 1315 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:
Technical Analysis: US Soy Complex Futures - Apr 24

July soybeans on Thursday closed lower, nearer the session low and scored a bearish "outside day" down on the daily bar chart.
China Soybean Imports In Both Apr,May To Top 3M Tons - Ministry

China will likely import 3.83 million metric tons of soybeans in April and 3.18 million tons in May, according to an initial government estimate issued today.
China Soybean Futures Settle Down; Govt Warns Of High Imports

Soybean futures traded on China's Dalian Commodity Exchange settled lower Friday, following an alert issued by the government on excessive imports.
MARKET TALK: India Soybean Futures Likely Down On Overseas Cues

India May NCDEX soybean contract likely to open down, tracking weak overseas markets and on some profit-taking, says Angel Commodities analyst Badruddin Khan.

Read more on Palmoil.com homepage

Asia Crude Palm Oil Down; Trade Volatile On Conflicting Cues

2009-04-15T18:06:00.000+06:00

Asia Crude Palm Oil Down; Trade Volatile On Conflicting Cues

Crude palm oil futures on Malaysia's derivatives exchange fell Wednesday in volatile trade that saw prices swing between positive and negative territory, said trade participants.

Read also in category "Palm market news":

Malaysian Cash Market Prices For Palm Oil - April 15 at 1000GMT Wednesday

The following are prices for Malaysian palm oil in the cash market at 1000GMT Wednesday, supplied by commodity broker Matthes & Porton Bhd.

MARKET TALK: BMD CPO Unch; Off Highs; Export Data In Conflict

BMD CPO futures up and down as volatile trade continues in second trading session on conflicting export data, traders say.

Malaysia's Apr 1-15 Palm Oil Exports Dn 1.6% On Month - SGS

Malaysia's palm oil exports during April 1-15 fell 1.6% to 582,823 metric tons from the same period a month earlier, cargo surveyor SGS (Malaysia) Bhd. said Wednesday.

MARKET TALK: Malaysia Palm Oil Exports Up On India, EU Sales

Malaysia's palm oil exports higher on more shipments to EU, India, Middle East.

India PEC Issues Tender To Import 12,000 Tons Crude Palm Oil

India's state-run PEC Ltd. issued a tender to import 12,000 metric tons of crude palm oil for delivery in May, the company said.

Malaysia's April 1-15 Palm Oil Exports 613,677 Tons - Intertek

Malaysia's palm oil exports rose 3.7% on month during the April 1-15 period to 613,677 metric tons, cargo surveyor Intertek Agri Services said Wednesday.

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Recent IPO List in Bangaldesh Stock Exchange:

2009-04-14T11:04:00.002+06:00

Here You will find link list to download prospectus of recent IPO in Bangladesh Share Market

Asian Crude Palm Oil Ends Higher On Lower Inventories

2009-04-08T11:49:00.000+06:00

Crude palm oil futures on Malaysia's derivatives exchange ended higher Tuesday, rising above MYR2,200 a metric ton for the first time in more than six months after the government said there was a further drawdown in inventories in March.

Read also in category "Palm market news":

Malaysia's Cash Market Prices For Palm Oil - April 7 at 1000 GMT Tuesday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Tuesday, supplied by commodity broker Matthes & Porton Bhd.

MARKET TALK: Malaysia Cash Palm Oil Up On Tight Supply

Malaysia's cash palm oil prices higher, tracking gains in BMD CPO futures and tight supply.

Indonesia Astra Agro Sells 6,500 Tons CPO Tuesday

Indonesia's PT Astra Agro Lestari (AALI.JK) Tuesday said in a statement it sold 6,500 metric tons of crude palm oil offered in an auction.

MARKET TALK: BMD CPO Futures Higher On Drawdown Of Stocks

BMD CPO futures higher on fresh buying support after government says palm oil inventories were drawn down to around 1.5 million tons last month.

Indonesian Physical Palm Oil Prices April 7

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

Indonesia's PTPN Sells 12,000 Tons Of CPO At Auction Tuesday

Indonesia's PT Perkebunan Nusantara said Tuesday it sold 12,000 metric tons of crude palm oil offered in a government auction.

MARKET TALK: BMD CPO Up; Stks Fall As Replanting Gathers Pace

BMD CPO futures up on falling stocks, say traders.

MARKET TALK: BMD CPO Up; Market Bullish On Tight Supplies

BMD CPO futures up; market sentiment bullish on tight supplies but potential for price downturn creeping in, say traders.

Malaysia Min:To Assist Palm Oil Mills On Methane - Control Proj

Malaysia will provide assistance to palm oil mills to set up facilities to control methane-gas emission, but won't make it mandatory for them to comply, Peter Chin, the country's minister for plantation and commodities, said Tuesday.

Malaysia Min: End-March Palm Oil Stocks Likely At 1.5M Tons

Malaysia's end-March palm oil inventories were likely down at around 1.5 million metric tons as the oil palm replanting program gathered pace, Minister for Plantation Industries and Commodities Peter Chin said Tuesday.

Sime Darby Exec:Current Global Palm Oil Demand ''Very Stable''

Crude palm oil prices, currently around MYR2,200 a metric ton, are "reasonable comfortable" for producers and global demand is "very stable," Azhar Abdul Hamid, managing director of Sime Darby Plantations, said Tuesday.

Malaysian Cash Market Prices For Palm Oil - April 7 at 0430 GMT Tuesday

The following are prices for Malaysian palm oil in the cash market at 0430 GMT Tuesday, supplied by commodity broker Matthes & Porton Bhd.

MARKET TALK: BMD CPO Up; Off Lows, Tracking Stronger Soyoil

BMD CPO futures up after initial dip on stronger soyoil futures in after-hours trade, traders say.

MARKET TALK: BMD CPO To Open MYR20 Dn On Weak Overnight Soyoil

Benchmark June CPO futures expected to open MYR20 down tracking weak overnight soyoil futures, say traders.

Read more on Palmoil.com homepage

CBOT Soy Review: Soybeans Succumb To Speculative Selling

2009-04-08T11:48:00.001+06:00

Speculative selling pressure and losses in equity and other grain markets pressured Chicago Board of Trade soybeans Tuesday, pushing the market into the red.

Read also in category "Soy market news":

US Cash Grain Review: Receipts Retreating In Step With Prices

Interior cash grain movement has largely waned this week, commensurate with a corresponding decline in farm-gate prices.

SURVEY: Soybean End Stocks To Tighten In April USDA S/D Report

Soybean ending stocks for 2008-09 are likely to be revised downward Thursday when the U.S. Department of Agriculture issues its April supply and demand report.

Brazil New Soy Crop At 58.1M Tons - Conab

Brazil should harvest 58.1 million metric tons of soybeans in the 2008-09 crop year, the National Commodities Supply Corp, or Conab, said Tuesday.

Argentina Ends Tax Breaks For Import, Crush Of Paraguay Soy

Argentina has suspended tax benefits designed to spur local processing of Paraguayan soybeans for re-export, dealing a heavy blow to its northern neighbor where farmers are struggling with a severe drought.

European Veg Oil PM Soft Oil Prices - Apr 7 at 1745 local time

Lowest known offers at 1745 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

Brazil Soy Export Premiums And Discounts - Apr 6

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.

Argentina Port Trade-Weighted Grain, Oilseed FOB - Apr 6

Free-on-board prices in U.S. dollars per metric ton.

Brazil's IBGE Puts 08-09 Soy Crop At 58.5M Metric Tons

The agricultural survey group of Brazil's Census Bureau, or the IBGE, on Tuesday put the 2008-09 soy crop at 58.5 million metric tons.

MARKET TALK: CBOT Grains Slip Overnight; May Soy Ends Flat

CBOT grain futures were lower overnight on pressure from outside markets, while nearby May soybeans ended unchanged, a floor analyst says.

Brazil New Soy Seen 3.1% Lower On Yr At 58.1M Tons - Conab

Brazil should harvest 58.1 million metric tons of soybeans in the 2008-09 crop year, the National Commodities Supply Corp, or Conab, said Tuesday.

China Soybean Futures Settle Up On Metals, External Markets

China's soybean futures traded on the Dalian Commodity Exchange settled higher Tuesday, tracking strong gains in external markets.

Read more on Palmoil.com homepage

Asia Crude Palm Oil Ends Dn On Proft-Taking, Long Liquidation

2009-04-06T19:04:00.002+06:00

Crude palm oil futures on Malaysia's derivatives exchange ended slightly lower Monday on long liquidation and profit-taking, said trade participants.

Read also in category "Palm market news":

Malaysia's Cash Market Prices For Palm Oil - April 6 at 1000 GMT Monday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Monday, supplied by commodity broker Matthes & Porton Bhd.

Indonesian Physical Palm Oil Prices April 6

The following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

Indonesia PTPN Sells 1,000 Tons CPO At Auction Monday

Indonesia's PT Perkebunan Nusantara Monday said in a statement it sold 1,000 metric tons of crude palm oil offered in a government auction.

MARKET TALK: Malaysia's Cash Palm Oil Lower On Weak Demand

Malaysia's cash palm oil prices ease on lack of interest among buyers.

Indonesia's Astra Agro Sells 2,000 Tons Of CPO Monday

Indonesia's PT Astra Agro Lestari said Monday it sold 2,000 metric tons of crude palm oil offered in an auction.

Indonesia May Lower Palm Oil Export Tax Trigger Price - Govt

Indonesia may lower its trigger price for imposing a tax on crude palm oil and its derivatives to ensure adequate domestic supplies and discourage exports, a senior government official said Monday.

MARKET TALK: BMD CPO Futures Lower Midday On Long Liquidation

BMD CPO futures lower midday, give up early gains on long liquidation, profit-taking, traders say.

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Malaysia's Cash Market Prices For Palm Oil - April 6 at 1000 GMT Monday

2009-04-06T17:53:00.000+06:00

KUALA LUMPUR (Dow Jones)--The following are prices for Malaysian palm oil in the cash market at 1000 GMT Monday,
supplied by commodity broker Matthes & Porton Bhd.

Prices are quoted in U.S. dollars a metric ton, except for crude palm oil and palm kernel oil. CPO prices are in
ringgits a ton. Palm kernel oil prices are in ringgits a pikul, a Malaysian measurement equivalent to 60 kilograms.

Refined, bleached and deodorized palm oil, FOB, Malaysian ports
Offer Change Bid Change Traded
April 690.00 +10.00 Unquoted - -
May/June 670.00 +05.00
Jul/Aug/Sep 640.00 -05.00 Unquoted - -

RBD palm olein, FOB, Malaysian ports
Offer Change Bid Change Traded
Apr 720.00 +10.00 Unquoted - -
May/June 700.00 +05.00
Jul/Aug/Sep 670.00 -05.00 Unquoted - -

RBD palm stearin, FOB, Malaysian ports
Offer Change Bid Change Traded
April 530.00 +10.00 Unquoted - -

Palm Fatty Acid Distillate, FOB Malaysian ports
Offer Change Bid Change Traded
April 410.00 +10.00 Unquoted - -

Crude palm oil, Delivered Basis, South Malaysia
Offer Change Bid Change Traded
April 2,280 -20.00 Unquoted - -

Palm kernel oil, Delivered Basis, South Malaysia
Offer Change Bid Change Traded
April 135 +02.00 Unquoted - -

($1.0=MYR3.5575)

Asia Crude Palm Oil Ends At 6-Mo High On Tight Supply, Soyoil

2009-04-01T18:59:00.000+06:00

Crude palm oil futures on Malaysia's derivatives exchange ended sharply higher Wednesday, rising as much as 3.5% to a six-month high, on fresh support due to tight supplies of both palm oil and soyoil, said trade participants.

Read also in category "Palm market news":

Malaysia's Cash Market Prices For Palm Oil - April 1 at 1000 GMT Wednesday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Wednesday, supplied by commodity broker Matthes & Porton Bhd.

Indonesia Astra Agro Sells 4,500 Tons CPO Wednesday

Indonesia's PT Astra Agro Lestari said in a statement it sold 4,500 metric tons of crude palm oil offered in an auction Wednesday.

Indonesian Physical Palm Oil Prices April 1

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

Indonesia PTPN Sells 3,500 Tons CPO At Auction Wednesday

Indonesia's PT Perkebunan Nusantara Wednesday said in a statement it sold 3,500 metric tons of crude palm oil offered in a government auction.

MARKET TALK: BMD CPO Futures Higher On Strong Fundamentals

BMD CPO futures higher, sustain above MYR2,000/ton throughout day's trading so far on buying support, strong fundamentals.

MARKET TALK: BMD CPO Futures Higher Midday On Low Inventories

BMD CPO futures higher midday on lower inventories, supply of major vegetable oils including both palm oil, soyoil.

MARKET TALK: BMD CPO Futures Higher On Tight Supplies

BMD CPO futures higher on tight supplies, slowdown in production, traders say.

Read more on Palmoil.com homepage

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Malaysia's March Palm Oil Exports Up 5.4% On Month

2009-03-31T18:34:00.000+06:00

KUALA LUMPUR (Dow Jones)--Malaysia's palm oil exports rose 5.4% on month in March to 1.22 million metric tons, cargo surveyor, SGS (Malaysia) Bhd., said Tuesday.

According to SGS, exports were 1.16 million tons in February, 1.33 million tons in January and 1.64 million tons in December.

Exports are unchanged on year. SGS had estimated last March's shipments at the same volume, though palm oil prices then were almost double of current levels.

The SGS estimate is above that of Intertek Agri Services, which pegged the figure at 1.16 million tons, down 0.5% on month.

The following are the major items of export, according to SGS:
(All figures are in metric tons)

March February
RBD Palm Olein 542,081 488,864
RBD Palm Oil 140,901 143,656
RBD Palm Stearin 118,739 115,318
Crude Palm Oil 190,260 221,590

Major importers of Malaysian palm oil:
European Union 216,778 147,818
China 331,932 359,670
U.S. 107,995 71,955
India 84,250 120,100
Pakistan 133,978 135,600

Asia Crude Palm Oil Ends Up On Export Recovery, Short Covering

2009-03-31T18:33:00.001+06:00

Crude palm oil futures on Malaysia's derivatives exchange rose 1.5% in rangebound trade Tuesday as investors covered shorts on a recovery in exports and spillover support from soybean oil.

Read also in category "Palm market news":

Malaysia's Cash Market Prices For Palm Oil - March 31 at 1000 GMT Tuesday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Tuesday, supplied by commodity broker Matthes & Porton Bhd.

MARKET TALK: Malaysia Palm Oil Exports Revive On EU, US Buying

Malaysia's palm oil exports rise on higher purchases by EU, US, data from cargo surveyors show.

MARKET TALK: Malaysia Cash Palm Oil Up On Tight Supply

Malaysia cash palm oil higher amid limited supply.

Indonesia Astra Agro Sells 8,000 Tons CPO Tuesday

Indonesia's PT Astra Agro Lestari Tuesday said in a statement it sold 8,000 metric tons of crude palm oil offered in an auction.

Indonesia PTPN Sells 4,000 Tons CPO At Auction Tuesday

Indonesia's PT Perkebunan Nusantara Tuesday said in a statement it sold 4,000 metric tons of crude palm oil offered in a government auction.

Indonesian Physical Palm Oil Prices March 31

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

Malaysia's March Palm Oil Exports Up 5.4% On Month - SGS

Malaysia's palm oil exports rose 5.4% on month in March to 1.22 million metric tons, cargo surveyor, SGS (Malaysia) Bhd., said Tuesday.

Malaysia's March Palm Oil Exports Dn 0.5% On Mo - Intertek

Malaysia's March palm oil exports fell 0.5% from the previous month to 1.16 million metric tons, cargo surveyor Intertek Agri Services said Tuesday.

Read more on Palmoil.com homepage

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CBOT Soy Review: Lower; Econ Woes, Void Of Fresh Support

2009-03-31T09:50:00.000+06:00

Soybean futures on the Chicago Board of Trade settled lower Monday, succumbing to selling pressure associated with economic woes and a lack of fresh supportive news.

Read also in category "Soy market news":

MARKET TALK: CBOT Soy Pdts Stumble In Unison With Soybeans

CBOT soy product futures ended lower, stumbling in unison with soybeans.
MARKET TALK:CBOT Soybeans Stumble; Econ Woes,Support Lacks

CBOT soybean futures settled lower, succumbing to selling pressure associated with economic woes and a lack of fresh supportive news.
MARKET TALK: CBOT Soybeans Sustaining Weakness Down Stretch

CBOT soybeans are sustaining weakness heading down stretch, as the absence of fresh support keeps sellers in command
MARKET TALK: CBOT Soybeans Pinned Lower On Outside Pressure

CBOT soybeans stay planted in negative territory, with bearish economic outlooks casting a bearish cloud over the market.
MARKET TALK: CBOT Soybeans Stumble On Outside Mkt Weakness

CBOT soy futures stumbled out of the starting blocks Monday, succumbing to bearish outside market influences.
CBOT Soy Outlook: Lower; Economic Woes, Lacks Fresh Support

Chicago Board of Trade soybean futures are poised for a lower start to Monday's day session, with economic woes and an absence of fresh supportive news weighing on the market.
US Cash Grain Outlook: Mkt Preparing For Big USDA Crop Report

The US cash grain market Monday was actively anticipating release of prospective planting and grain stocks reports from the USDA, amid an environment of uneven basis and faltering futures prices.
Brazil Soy Export Premiums And Discounts - Mar 27

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.
MARKET TALK: Large Specs Add Length In CBOT Soybeans

Large speculative traders now hold 17,176 net long positions in CBOT soybean futures and options combined contracts as of March 24, compared with net shorts of 970 in the previous week, according to the Commodity Futures Trading Commission in its supplemental commitments of traders report.
Argentina Port Trade-Weighted Grain,Oilseed FOB - Mar 27

Free-on-board prices in U.S. dollars per metric ton.
MARKET TALK: India Soybean Futures End Down On Global Cues

India April soybean contract on NCDEX erases early gains and provisionally ends down 0.2% at INR2,343/10 kg, tracking global markets, on reports government extended stock limits on edible oils until Sept. 30.
European Veg Oil AM Soft Oil Prices - Mar 30 at 1330 local time at 1330 local time

Lowest known offers at 1330 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:
Technical Analysis: US Soy Complex Futures - Mar 30

May soybeans on Friday closed lower, near the session low, hit a fresh two-week low and closed at a bearish weekly low close.
China Soybean Futures Settle Down On Cash Prices, USDA Report

Soybean futures traded on China's Dalian Commodity Exchange settled lower Monday on declines in local cash prices and in Chicago Board of Trade futures Friday, and expectations of greater supply from the U.S. this year.
MARKET TALK: India Soybean Futures Up 0.5%; Weak Supplies

India April soybean contract on NCDEX up 0.5% at INR2,358/100 kg, tracking firm overseas markets, decline in local supplies.
MARKET TALK: India Soybean Futures Likely Down; Rapeseed Supply

India soybean futures likely to open slightly lower on end of farmers' strike in Argentina, high rapeseed arrivals in local markets.

Read more on Palmoil.com homepage [www.palmoil.com]

Asian Crude Palm Oil Ends Dn On Crude,Soyoil; Exports May

2009-03-30T18:21:00.001+06:00

Crude palm oil futures on Malaysia's derivatives exchange declined Monday on pressure from lower soybean oil and crude oil futures and expectations of lower on-month exports in March, said trade participants.

Malaysian Cash Market Prices For Palm Oil - March 30 at 1000 GMT Monday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Monday, supplied by commodity broker Matthes & Porton Bhd.
Indonesian Physical Palm Oil Prices March 30

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.
Indonesia Astra Agro Sells 1,500 Tons CPO Monday

Indonesia's PT Astra Agro Lestari said in a statement it sold 1,500 metric tons of crude palm oil offered in an auction Monday.
Indonesia PTPN Sells 2,000 Tons CPO At Auction Monday

Indonesia's PT Perkebunan Nusantara Monday said in a statement it sold 2,000 metric tons of crude palm oil offered in a government auction.

Asian CPO Ends Off Highs; Exports Likely Dn; India Soyoil Tax

2009-03-19T18:46:00.000+06:00

Crude palm oil futures on Malaysia's derivatives exchange gave up most intraday gains Thursday and fell below MYR1,900/ton for the first time this week on a likely fall in overall exports and reports that India has scrapped its import duty on soyoil, said trade participants.

Read also in category "Palm market news":

MARKET TALK: BMD CPO Futures Ease On India Soyoil Report

BMD CPO futures gave up all intra-day gains, briefly moved into negative territory on reports from India of scrapping import duty on crude soyoil.

Malaysia's Cash Market Prices For Palm Oil - March 19 at 1000 GMT Thursday

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Thursday, supplied by commodity broker Matthes & Porton Bhd.

Indonesian Physical Palm Oil Prices March 19

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

Malaysia Mar 1-20 Palm Oil Exports Likely Dn 8%-10% On Mo

Malaysia's palm oil exports are likely to fall by 8%-10% on month during the March 1-20 period to 720,000 metric tons, due to a slowdown in shipments in the last few days, trading and shipping executives said Thursday.

Indonesia PTPN Sells 1,500 Tons CPO At Auction Thursday

Indonesia's PT Perkebunan Nusantara Thursday said in a statement it sold 1,500 metric tons of crude palm oil offered in a government auction.

Indonesia Astra Agro Sells 3,500 Tons CPO Thursday

Indonesia's PT Astra Agro Lestari Thursday said in a statement it sold 3,500 metric tons of crude palm oil offered in an auction.

Malaysia Puts Off Palm Oil Trade Meet In Pakistan Indefinitely

The Malaysian Palm Oil Council has indefinitely postponed its upcoming trade conference in Pakistan's port city of Karachi due to logistical problems, a government official said Thursday.

Greenpeace Protest At Indonesian Paper Firm Turns Violent

Greenpeace activists and security guards clashed outside the headquarters of Indonesia's biggest logging and palm oil company, the Sinar Mas Group (SMAR.JK), in Jakarta on Thursday, environmentalists said.

Read more on Palmoil.com homepage

CBOT Soy Review:Mixed Trade, Old Crop Up On Argentine Unrest

2009-03-19T09:43:00.001+06:00

Nearby Chicago Board of Trade soybean futures finished higher Wednesday, as export potential was bolstered by Argentine unrest and weakness in value of the U.S. dollar index.

Read also in category "Soy market news":

US Cash Grain Review: Increasing Commercial Inventories

Commercial stockpiles of U.S. cash grain are expanding, led by growth in off-farm inventories of corn, soybeans and sorghum.

MARKET TALK: CBOT Soy Finishes Mixed; Old Crop Gains On New

CBOT soybean futures closed mixed, with nearby old-crop months gaining at the expense of deferred new-crop contracts.

European Veg Oil PM Soft Oil Prices - Mar 18 at 1745 local time

Lowest known offers at 1745 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

MARKET TALK: CBOT Soybeans Slip In Two-Sided Trade

CBOT soybean futures are experiencing a two-sided trade and currently are slipping near the day's lows.

India Govt Likely To Consider Soyoil Import Tax Cut

A government panel will likely soon consider cutting the 20% import tax on soyoil, people familiar with the matter said Wednesday.

Brazilian Soy Trade Is Lifted By CBOT Rise; Chinese Buy

Despite overall slow activity, Brazil's soybean trade has been given a boost on steady demand from China and by better prices at the Chicago Board of Trade, industry sources said Tuesday.

Brazil Soy Export Premiums And Discounts - Mar 17

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.

Argentina Port Trade-Weighted Grain,Oilseed FOB - Mar 17

Free-on-board prices in U.S. dollars per metric ton.

MARKET TALK: India Soybean Futures Down 0.6% On Profit-Taking

India April soybean contract down 0.6% at INR2,328/100 kg on profit-taking sparked by global markets downtrend, high local rapeseed supplies, says Bonanza Commodities analyst Vibhu Ratandhara.

MARKET TALK: India Soybean Futures Dn 0.3% on Overseas Cues

India April soybean contract 0.3% lower at INR2,336/100 kg due to a fall in US soy prices in electronic trade.

India Soymeal Exports To Gain From Poor Crop Of Rivals - Trade

India's soymeal exports are likely to benefit from a poor soyabean crop in Brazil and Argentina, but slower purchases by customers due to the economic slowdown is likely to drag down any hopes of a rise in shipments from a year ago, traders said Wednesday.

MARKET TALK: India Soybean Futures Likely Up; Low Stocks

India soybean futures likely to open firm on low spot stocks, overseas strength, crude oil gains, says Karvy Comtrade analyst Veeresh Hiremath.

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Asian Crude Palm Oil Ends Up On Cash Mkt Demand; Crude

2009-03-17T19:18:00.000+06:00

Asian Crude Palm Oil Ends Up On Cash Mkt Demand; Crude

Crude palm oil futures on Malaysia's derivatives exchanged ended higher Tuesday, recovering some of the previous day's losses on spillover gains from soyoil and crude oil as well as on good demand in the cash market, trade participants said.

Read also in category "Palm market news":

Malaysia's Cash Market Prices For Palm Oil - March 17 at 1000 GMT T

The following are prices for Malaysian palm oil in the cash market at 1000 GMT Tuesday, supplied by commodity broker Matthes & Porton Bhd.

Malaysia, Pakistan Sign Agreement On Palm Oil Refining - Exec

The Malaysian Palm Oil Board has signed an agreement to supply palm oil refining technology and training to processors in Pakistan, who will import more crude palm oil from Malaysia in return.

Indonesian Physical Palm Oil Prices March 17

Following are Indonesian physical palm oil prices quoted by traders in rupiah a kilogram.

Indonesia Astra Agro Sells 4,500 Tons CPO Tuesday

Indonesia's PT Astra Agro Lestari Tuesday said in a statement it sold 4,500 metric tons of crude palm oil offered in an auction.

Indonesia PTPN Sells 5,500 Tons CPO At Auction Tuesday

Indonesia's PT Perkebunan Nusantara Tuesday said in a statement it sold 5,500 metric tons of crude palm oil offered in a government auction.

Read more on Palmoil.com homepage

CBOT Soy Review: Gains Sustained As Crude Oil Turns Positive

2009-03-17T09:33:00.001+06:00

Chicago Board of Trade soybean futures posted strong gains Monday, bolstered by gains in crude oil and equities and weakness in value of the U.S. dollar index.

Read also in category "Soy market news":

MARKET TALK: CBOT Soy Products Follow Soybeans, Stocks Higher

The CBOT soy complex finished on the upside Monday, in line with gains logged in soybean, crude oil and equities.

MARKET TALK: CBOT Soy Makes Strong Gains, Closes Off Highs

CBOT soybean futures led the agricultural complex higher Monday.

MARKET TALK: CBOT Soy Strength Bolstered By Crude Oil Gains

Nearby CBOT soybean futures are holding gains over 30 cents Monday.

European Veg Oil PM Soft Oil Prices - Mar 16 at 1745 local time

Lowest known offers at 1745 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

MARKET TALK: USDA Weekly Soybeans Inspections Down 27.4%

U.S. soybeans inspected by the USDA for export in the week ended March 12 totaled 22.416 million bushels.

MARKET TALK: CBOT Soybeans Jump Above $9 Per Bushel

CBOT soybean futures opened higher Monday, piercing the $9 mark.

MARKET TALK: Speculative Funds Add Long CBOT Soymeal Exposure

Large speculative traders were net long 9,142 contracts combined CBOT soymeal futures and options positions after adding 2,433 long and 1,064 short positions.

MARKET TALK: Speculative Funds Add Long CBOT Soyoil Positions

Index funds were net long 38,759 in combined futures and options CBOT soyoil positions as of March 10, according to the supplemental to the CFTC's commitment of traders report.

CBOT Soy Outlook: Rise Expected In-line With Overnight Gains

Soybean futures on the Chicago Board of Trade are expected to firm 6-8 cents during Monday's opening trades, following overnight gains.

US Cash Grain Outlook: Corn Prices At A Two-Month High

The cash value of corn stood at it's highest level in more than two months Monday, the result of a 10-day rally that has added nearly 40 cents a bushel to average market prices throughout the U.S.

Brazil Soy Export Premiums And Discounts - Mar 13

Premiums and discounts for soybeans at Paranagua port, Brazil, against Chicago Board of Trade quotes.

MARKET TALK: India Soybean Contract Ends Down 0.04%

India April soybean contract erases gains, provisionally ends down 0.04% at INR2,332/100 kg on higher imports and rising supplies of rapeseed due to peak harvesting season.

Argentina Port Trade-Weighted Grain, Oilseed FOB - Mar 13

Free-on-board prices in U.S. dollars per metric ton.

China Soybean Futures Settle Up On Cash Prices; Govt Support

China's soybean futures traded on the Dalian Commodity Exchange settled higher Monday, supported by cash prices.

MARKET TALK: India Soybean Futures Up On Low Stocks

India April soybean contract up 0.9% at INR2,353/100 kg on weak local supplies, firm overseas markets.

China Feb Soyoil Imports Fall 89% On Yr; May Stay Low

China's soyoil imports in February plunged from a year ago as local prices fell below levels prevailing globally on account of ample supplies, discouraging traders from contracting shipments, analysts said.

MARKET TALK: India Soybean Futures Likely Tad Up On CPO Gains

India soybean futures likely to open slightly higher, tracking gains in Malaysian crude palm oil and firmness in U.S. soy complex in electronic trade.

Argentina Soy Yields Low, But Showers Help - Exchange

Early yields from Argentina's 2008-09 soy crop have been low so far, but recent showers helped to stem further losses, the Buenos Aires Cereals Exchange said in its weekly crop report Friday.

China Feb Soyoil Imports 40,000 Tons, Down 89% On Year

China imported 40,000 metric tons of soyoil in February, down 89% from a year earlier, according to preliminary data issued Monday by the General Administration of Customs.

World Trade Orgnaization

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The world trade organization (WTO) was established on 1^st January 1995 due to the reason of the Uruguay Round of multi trade negotiations concluded in 1994.

The predecessor of WTO is General Agreement on Tariffs and Trade (GATT). WTO is an International body dealing with the rules of trade among states and separate customs territories. The agreements in WTO provide the legal ground-rules for international trade and commerce. They are mainly contracts, binding governments to conduct their trade and trade policies according to principles and rules. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters and importers over the Globe and bringing them under one roof.

The International body has over 148 members as on October 13,2004 accounting for 90% of the world trade and around 30 others are negotiating membership and are WTO observers.

Objectives of WTO

With manifold objectives like helping trade flow smoothly, freely, fairly and predictably it has become capable of organizing trade and commerce over the Globe through the mantra of liberalization, privatization and globalization. It is stepping forward with objectives like:

1) Rejecting all forms of protectionism.

2) Removing trade barriers and eliminating discriminatory treatment in international trade through successive multilateral trade negotiations.

3) Providing a fair, predictable and open rule-based trading system through overseeing the implementation of multilateral trade rules and enforcing legally binding obligations.

4) Providing a mechanism for settling trade disputes.

5) Integrates developing and least developed economies into the world trading system.

Structure of WTO: -

WTO is run by its member nations. Decisions are taken by consensus among entire member nations.

The WTO's top-level decision-making body is the ministerial conference, which meets at least once in every two years.

Below this is the general council (normally represented by ambassadors and heads of delegation in Geneva, but sometimes officials sent from members' capitals), which meets several times a year in Geneva. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body.

At the next level there are three Councils each handling a different broad area of trade - the Council for Trade in Goods (Goods Council), the Council for Trade in Services (Services Council), and the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council).

There are also specialized committees, working groups and working parties dealing with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. They regularly report to the General Council, Goods Council and Services Council as appropriate.

The WTO secretariat in Geneva has around 600 staffs and is headed by a director general. The WTO Secretariat's main duties are to provide administrative support for the running of the system.

IMF

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The International Monetary Fund (IMF) was created in 1945 to help and promote the health of the world economy. Its Headquarter in Washington DC .It is governed by and accountable to the governments of the countries that make up its near-global membership.

The International Monetary Fund also known as the “IMF” was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, U.S. in July 1944. The 45 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s.

Presently there are memberships of 184 countries over the world and a staff of approximately 2,680 from 139 countries. Total Quotas to the extent of $312 billion (as of 8/31/05). Loans outstanding $71 billion to 82 countries, of which $10 billion to 59 on concessional terms (as of 8/31/05) and technical Assistance provided 381 person years during FY2005.Surveillance consultations concluded 129 countries during FY2005, of which 118 voluntarily published information on their consultation.

Responsibilities of IMF:-

Article 1 sets out main responsibilities of IMF which are as follows,

1) Promoting international monetary cooperation.

2) Facilitating the expansion and balanced growth of international trade.

3) Promoting exchange stability.

4) Assisting in the establishment of a multilateral system of payments and

5) Making its resources available (under adequate safeguards) to members experiencing balance of payments difficulties.

Generally, the IMF is responsible for ensuring the stability of the international monetary and financial system—the system of international payments and exchange rates among national currencies that enables trade to take place between countries. The Fund seeks to promote economic stability and prevent crises; to help resolve crises when they do occur; and to promote growth and alleviate poverty. It employs three main functions—surveillance, technical assistance, and lending—to meet these objectives.

HIGH LIGHTS OF IMF ACTIVITIES: -

* The IMF works to promote global growth and economic stability and there by prevent economic crisis—by encouraging countries to adopt sound economic policies.

Act of being vigilant is the regular dialogue and policy advice that the IMF offers to each of its members. Generally once a year, the Fund conducts in-depth appraisals of each member country's economic situation. It discusses with the country's authorities the policies that are most conducive to stable exchange rates and a growing and prosperous economy. Members have the option to publish the Fund's assessment, and the overwhelming majority of countries opt for transparency, making extensive information on bilateral surveillance available to the public. The IMF also combines information from individual consultations to form assessments of global and regional developments and prospects. These views on the IMF's multilateral surveillance are published twice each year in the world economic outlook and the global financial stability report.

Technical assistance and training are offered—mostly free of charge—to help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas, including fiscal policy, monetary and exchange rate policies, banking and financial system supervision and regulation, and statistics.

* In the event that member countries do experience difficulties financing their balance of payments, the IMF is also a fund that can be tapped to help in recovery.

Financial stability is available to give member countries the breathing room they need to correct balance of payments problems. A policy program supported by IMF financing is designed by the national authorities in close cooperation with the IMF, and continued financial support is conditional on effective implementation of this program.

*The IMF is also actively working to reduce poverty in countries around the globe, independently and in collaboration with the World Bank and other organizations.

The IMF provides financial support through its concessional lending facility—the poverty reduction and growth facility (PRGF) —and through debt relief under the Heavily indebted poor countries (HIPC).

Noble Prize in Economics : 1969-2007

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Nobel Prize Winners In Economics

For the year 2007, the Nobel Prize winners in Economics Science are Leonid Hurwicz, Eric S Maskin, and Roger B. Myerson for having laid the foundations of mechanism design theory.

1969 Ragnar Frisch (Norway) and Jan Tinbergen (Netherlands), for work in econometrics (application of mathematics and statistical methods to economic theories and problems)

1970 Paul, A, Samuelson (U.S.), for efforts to raise the level of scientific analysis in economic theory.

1971 Simon Kuznets (U.S.), for developing concept of using a country's gross national product to determine its economic growth.

1972 Kenneth J. Arrow (U.S.) and Sir John R. Hicks (UK), for theories that help to assess business risk and government economic and welfare policies.

1973 Wassily Leontief (U.S.), for devising the input-output technique to determine how different sectors of an economic, social and institutional phenomena.

1974 Gunnar Myrdal (Sweden) and Friedrich A. von Hayek (UK), for pioneering analysis of the interdependence of economic, social and institutional phenomena.

1975 Leonid V. Kantorovich (USSR) and Tjalling C. Koopmans (U.S.), for work on the theory of optimum allocation of resources.

1976 Milton Friedman (U.S.), for work in consumption analysis and monetary history and theory, and for demonstration of complexity of stabilization policy

1977 Bertil Ohlin (Sweden) and James E. Meade (UK), for contributions to theory of international trade and international capital movements.

1978 Herbert A. Simon (U.S.), for research into the decision-making process within economic organizations.

1979 Sir Arthur Lewis (UK) and Theodore Schultz (U.S.), for work on economic problems of developing nations.

1980 Lawrence R. Klein (U.S.), for developing models for forecasting economic trends and shaping policies to deal with them.

1981 James Tobin (U.S.), for analyses of financial markets and their influence on spending and saving by families and businesses

1982 George J. Stigler (U.S.), for work on government regulation in the economy and the functioning of industry

1983 Gerard Debreu (U.S.), in recognition of his work on the basic economic problem of how prices operate to balance what producers supply with what buyers want

1984 Sir Richard Stone (UK), for his work to develop the systems widely used to measure the performance of national economics

1985 Franco Modigliani (U.S.), for his pioneering work in analyzing the behavior of household savers and the functioning of financial markets

1986 James M. Buchanan (U.S.), for his development of new methods for analyzing economic and political decision-making.

1987 Robert M. Solo (U.S.), for seminal contributions to the theory of economic growth.

1988 Maurice Allais (France), for his pioneering development of theories to better understand market behavior and the efficient use of resources

1989 Trygve Haavelmo (Norway), for his pioneering work in methods for testing economic theories.

1990 Harry M. Markowitz, William F. Sharpe, and Merton H. Miller (all U.S.), whose work provided new tools for weighing the risks and rewards of different investments and for valuing corporate stocks and bonds

1991 Ronald Coase (U.S.), for his pioneering work in how property rights and the cost of doing business affect the economy.

1992 Gary S. Becker (U.S.), for "having extended the domain of economic theory to aspects of human behavior which had previously been dealt with-if at all-by other social science disciplines"

1993 Robert W. Fogel and Douglass C. North (both U.S.), for their work in economic history

1994 John F. Nash, John C. Harsanyi (both U.S.), and Reinhard Selten (Germany), for their pioneering work in game theory

1995 Robert E. Lucas, Jr. (U.S.), for having and the greatest influence on macroeconomic research since 1970

1996 James A. Mirrlees (UK) and William Vickrey (U.S.), for their fundamental contributions to the economic theory of incentives

1997 Robert C. Merton and Myron S. Scholes (both U.S.), for developing a formula that determines the value to stock options and other derivatives.

1998 Amarty Sen (India), for his contributions to welfare economics

1999 Robert A, Mundel (Canada), for his work on monetary dynamics and optimum currency areas

2000 James J. Heckman and Daniel L. McFadden (both U.S.), for developing methods used in statistical analysis of individual and household behavior

2001 George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz (all U.S.), for market analyses with asymmetric information

2002 Daniel Kahneman (U.S.), for having integrated insights from psychological research into economic science; Vernon L. Smith (U.S.), for having established laboratory experiments as a toolin empirical economic analysis.

2003 Robert.F.Engle (US) and Clive W.J.Granger (UK) for developing the statistical tools for stock prices.

2004 Finn. E. Kydland (Norway) and Edward C. Prescott (US) for their contribution in macro economics.

2005 Robert Auman and Thomas Schillong for their contribution to Game Theory.

2006 Edmund S. Phelps (USA), for his analysis of intertemporal tradeoffs in macroeconomic policy".

What is Mixed Economy ?

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Mixed Economy

A mixed economy combines elements of both the planned and the market economies in one cohesive system. This means that certain features from both market and planned economic systems are taken to form this type of economy. This system prevails in many countries where neither the government nor the business entities control the economic activities of that country – both sectors play an important role in the economic decision-making of the country. In a mixed economy there is flexibility in some areas and government control in others. Mixed economies include both capitalist and socialist economic policies and often arise in societies that seek to balance a wide range of political and economic views.

What is Planned Economy ?

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Planned Economy

A planned economy is also sometimes called a command economy. The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, are all made by the government.

The planned economy is government directed, and market forces have very little say in such an economy. This type of economy lacks the kind of flexibility that is present a market economy, and because of this, the planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply and demand.

On the other hand, a planned economy aims at using all available resources for developing production instead of allotting the resources for advertising or marketing.

What is Market Economy ?

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Market Economy

In a market economy, national and state governments play a minor role. Instead, consumers and their buying decisions drive the economy. In this type of economic system, the assumptions of the market play a major role in deciding the right path for a country’s economic development.

Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-determination of prices for different commodities, and the amount of regulation controlling different industrial sectors.

The absence of central planning is one of the major features of this economic system. Market decisions are mainly dominated by supply and demand. The role of the government in a market economy is to simply make sure that the market is stable enough to carry out its economic activities properly.

Economic Terms : Z

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Zero-sum game

When the gains made by winners in an economic transaction equal the losses suffered by the losers. It is identified as a special case in GAME THEORY. Most economic transactions are in some sense positive-sum games. But in popular discussion of economic issues, there are often examples of a mistaken zero-sum mentality, such as “PROFIT comes at the expense of WAGES”, “higher PRODUCTIVITY means fewer jobs”, and “IMPORTS mean fewer jobs here”.

Economic Terms : Y

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Yield

The annual income from a SECURITY, expressed as a percentage of the current market PRICE of the security. The yield on a SHARE is its DIVIDEND divided by its price. A BOND yield is also known as its INTEREST RATE: the annual coupon divided by the market price.

Yield curve

Shorthand for comparisons of the INTEREST RATE on GOVERNMENT BONDS of different maturity. If investors think it is riskier to buy a bond with 15 years until it matures than a bond with five years of life, they will demand a higher interest rate (YIELD) on the longer-dated bond. If so, the yield curve will slope upwards from left (the shorter maturities) to right. It is normal for the yield curve to be positive (upward sloping, left to right) simply because investors normally demand compensation for the added RISK of holding longer-term SECURITIES. Historically, a downward-sloping (or inverted) yield curve has been an indicator of RECESSION on the horizon, or, at least, that investors expect the CENTRAL BANK to cut short-term interest rates in the near future. A flat yield curve means that investors are indifferent to maturity risk, but this is unusual. When the yield curve as a whole moves higher, it means that investors are more worried that INFLATION will rise for the foreseeable future and therefore that higher interest rates will be needed. When the whole curve moves lower, it means that investors have a rosier inflationary outlook.

Even if the direction (up or down) of a yield curve is unchanged, useful information can be gleaned from changes in the SPREADS between yields on bonds of different maturities and on different sorts of bonds with the same maturity (such as government bonds versus corporate bonds, or thinly traded bonds versus highly liquid bonds).

Yield gap

A way of comparing the performance of BONDS and SHARES. The gap is defined as the AVERAGE YIELD on equities minus the average yield on bonds. Because shares are usually riskier investments than bonds, you might expect them to have a higher yield. In practice, the yield gap is often negative, with bonds yielding more than equities. This is not because investors regard equities as safer than bonds (see EQUITY RISK PREMIUM). Rather, it is that they expect most of the benefit from buying shares to come from an increase in their PRICE (CAPITAL appreciation) rather than from DIVIDEND payments. Bond investors usually expect more of their gains to come from coupon payments. They also worry that INFLATION will erode the REAL VALUE of future coupons, making them value current payments more highly than those due in years to come. Moreover, the usefulness of the dividend yield as a guide to the performance of shares has declined since the early 1990s, as increasingly companies have chosen to return cash to shareholders by buying back their own shares rather than paying out bigger dividends.

Economic Terms : X

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X-efficiency

Producing OUTPUT at the minimum possible cost. This is not enough to ensure the best sort of economic EFFICIENCY, which maximises society’s total CONSUMER plus PRODUCER SURPLUS, because the quantity of output produced may not be ideal. For instance, a MONOPOLY can be an X-efficient producer, but in order to maximise its PROFIT it may produce a different quantity of output than there would be in a surplus-maximising market with PERFECT COMPETITION.

Economic Terms : W

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Wage drift

The difference between basic pay and total earnings. Wage drift consists of things such as overtime payments, bonuses, PROFIT share and performance-related pay. It usually increases during periods of strong GROWTH and declines during an economic downturn.

Wages

The PRICE of LABOUR. In theory, wages ought to change so that the SUPPLY and DEMAND in the labour market are always in EQUILIBRIUM. In practice, wages are often sticky, especially in a downward direction: when demand for labour falls, wages do not fall. In this situation, the fall in demand results in higher involuntary UNEMPLOYMENT. Trade UNIONS may use collective bargaining to keep wages above the market-clearing rate. Furthermore, many governments impose a MINIMUM WAGE that employers must pay.

FIRMS may choose to pay above the equilibrium wage to increase the PRODUCTIVITY of workers. Such so-called EFFICIENCY WAGES may make workers less likely to join another firm, so cutting the employer’s hiring and training costs. They may encourage workers to do a better job. They may also attract a higher quality of worker than wages at the market-clearing rate; better workers may have a higher RESERVATION WAGE (the lowest wage for which they are willing to work) than the market-clearing equilibrium.

In recent years, employers have tried to reduce wage stickiness by increasing the proportion of pay that is linked to the performance of their firm. Thus if falling demand reduces the employer’s PROFIT the pay of its employees falls automatically, so it does not have to lay off as many workers as it otherwise would. Performance-related wages can also reduce AGENCY COSTS by giving hired hands a stronger incentive to do a good job.

Wealth effect

As people get wealthier, they consume more. This wealth effect has important consequences for MONETARY POLICY. When there is an INTEREST RATE increase, future INCOME from ASSETS such as EQUITIES must be discounted at a higher rate than before. As a result their owners feel poorer and spend less. A cut in interest rates has the opposite effect. Economists disagree on the wealth ELASTICITY of CONSUMPTION: how much consumer spending would rise if wealth increased by, say, 1%. Different consumers may have different wealth elasticity. If most of the increase in wealth goes to poorer people this may have a different wealth effect than if most of it went to people who are already wealthy. The source of the wealth increase may also matter. If SHARE PRICES rise or interest rates fall, consumers may be slow to spend out of their increased wealth if they think the increase may be temporary. However, if they think a sharp rise in share prices is permanent and the stockmarket then tumbles, the result may be that consumption falls by enough to cause a RECESSION. The wealth effect of rising HOUSE PRICES is particularly uncertain.

Wealth tax

In most countries, the majority of wealth is concentrated in a fairly small number of hands. This makes a wealth tax appealing to politicians, as it should allow substantial amounts of revenue to be raised from comparatively few people, allowing the TAX BURDEN on the majority of the POPULATION to be kept down. It also appeals because it promotes meritocracy by making it harder to be born with a silver spoon in your mouth. A wealth tax reduces the disparities in wealth rather than INCOME that are the biggest determinant of how the scales are weighted for succeeding generations. What could be better than a tax that produces lots of money for the GOVERNMENT and strikes most voters as being extremely fair?

Alas, as critics point out, wealth taxes may cause inefficiency by discouraging wealth-creating economic activities. Moreover, the revenue collected may prove disappointing. The wealthiest people are often the most skilled at TAX AVOIDANCE, not least because they can afford good tax accountants. Despite the enormous concentration of wealth in a small part of the population, on AVERAGE across the OECD wealth taxes account for less than 2% of total tax revenue.

A wealth tax can achieve HORIZONTAL EQUITY and VERTICAL EQUITY (so that people of similar means pay the same and those with more pay more) in ways that INCOME TAX cannot. For instance, neither a poor person nor a rich person with no income would pay income tax, and only the rich person would pay the wealth tax.

Wealth taxes come in two main forms. CAPITAL transfer taxes are levied when wealth changes hands, either at death (inheritance tax) or through donation (gift tax). Annual wealth taxes are levied each year as a fraction of the taxpayer’s net worth. Some people regard CAPITAL GAINS tax as a wealth tax, but, strictly speaking, it is a tax on the income earned on capital, rather than a wealth tax on the capital itself.

Weightless economy

At the start of the 21st century, the total OUTPUT of the American economy weighed roughly the same as it did 100 years earlier. Yet the value of that output, in REAL TERMS, was 20 times greater. Output is increasingly weightless, produced from INTELLECTUAL CAPITAL rather than physical materials. Production has shifted from steel, heavy copper wire and vacuum tubes to microprocessors, fine fibre-optic cables and transistors. SERVICES have increased their share of GDP. This weightless or dematerialised economy, most economists agree, is not just lighter but also more efficient.

Welfare

Americans use welfare as shorthand for GOVERNMENT handouts to the poor. Economists use it to describe the well being of an individual or society, as in “Are tax cuts welfare-enhancing?”. This is economist-speak for “Will tax cuts improve the overall well being of the country?” (See UTILITY.)

Welfare economics

Economics with a heart. The study of how different forms of economic activity and different methods of allocating scarce resources affect the well being of different individuals or countries. WELFARE economics focuses on questions about EQUITY as well as EFFICIENCY.

Welfare to work

Active LABOUR market policies, in which GOVERNMENT handouts to the unemployed come with strings attached, designed to get the recipient off welfare and back to work as quickly as possible.

Windfall gains

INCOME you do not expect, such as winning a lottery prize. Economists have long argued about whether people are likely to save such windfalls or spend them. According to the PERMANENT INCOME HYPOTHESIS, favoured by most economists, people save the lion's share of windfall gains. But real life often contradicts this; ask any lottery winner.

Windfall profit

A controversial concept, often used by politicians to justify imposing a TAX on PROFIT that in theory is earned unexpectedly, through circumstances beyond the control of the company concerned, and is thus deemed undeserved and ripe for the taking by the tax authorities. As the profits were neither expected nor a result of the efforts of the firm, taxing them should not harm the firm’s incentives to maximise future profits. The problem comes when greedy politicians start claiming that profits are windfalls when in fact they are deserved and expected. Then taxing them sends a signal to FIRMS that they should not try too hard to make profits, as if they do too well they will not get to keep the profits anyway. If this became widely believed, effort would probably decline and economic GROWTH would be slower.

Winner-takes-all markets

No time for losers. In certain jobs, the market pays individuals not according to their absolute performance but according to their performance relative to others. The INCOME of window cleaners depends upon how many windows they clean, but investment bankers’ pay may depend upon their performance ranking. Slightly more talented window cleaners will make only a small difference to the transparency of their customers’ windows, but in the markets for selling BONDS that slight edge can mean everything. Rewards at the top are therefore disproportionately high, and rewards below the top are disproportionately low. People in these professions are often willing to work for very little just to have the chance to compete for the top job and the jackpot that comes with it.

This sort of economics has long been prevalent in celebrity-dominated businesses such as entertainment and sport. But this reward structure is spreading to more and more occupations, including journalism, the law, medicine and corporate management. GLOBALISATION has expanded the market for skills, increasing the opportunities for the rich to become even richer.

In a normal market, sumptuous superstar incomes would attract competition from more applicants to do the jobs that pay them. This would then bring salaries down to less exotic levels. In a winner-takes-all market, this does not happen. An investment BANK wants the best analysts and dealers; second best will not do. It can also afford to pay. Some economists believe that because of more liberalised markets there will be growing INEQUALITY in most professions and the emergence of a winner-takes-all society.

Withholding tax

A tax that is collected at source, before the taxpayer has seen the INCOME or CAPITAL to which the tax applies. In other words, that part of the income or capital due in tax is withheld from the taxpayer, who therefore cannot easily avoid paying the tax. Withholding taxes are frequently imposed on INTEREST and DIVIDENDS.

World bank

An institution created with the IMF at BRETTON WOODS in 1944 and opened in 1946. The World Bank has three main branches: the International Bank for Reconstruction and Development (IBRD), the International Development Agency (IDA) and the International Finance Corporation (IFC). Collectively, it aims to promote economic development in the world’s poorer countries through advice and long-term lending, averaging $30 billion a year, spread around 100 countries.

Critics of the World Bank say that it often worsens the problems facing DEVELOPING COUNTRIES. Its advice has often been guided by economic fashion, which led it to support a centrally planned brand of DEVELOPMENT ECONOMICS in the 1960s and 1970s, before switching to PRIVATISATION and STRUCTURAL ADJUSTMENT in the 1980s and then to promoting democracy and economic TRANSPARENCY, and attacking CRONY CAPITALISM, in the late 1990s. Until recently, it has generally supported big, high-profile projects rather than more economically useful smaller schemes. It has often failed to ensure that its loans have been spent on the intended project. Its willingness to pump money into struggling countries creates a potential MORAL HAZARD, in which politicians may have little incentive to govern well because they believe that, if they do a bad job, the World Bank will come to the rescue. The increase in private-sector lending to and INVESTMENT in emerging markets has led to growing discussion of whether the World Bank is any longer needed.

World trade organisation

Bête noire of anti-globalisation protesters. The World Trade Organisation is the governing body of international trade, setting and enforcing the rules of trade and punishing offenders. Established during the Uruguay Round of talks under the GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT), it opened for business in 1995 with a membership of 132 countries (rising to 146 by 2003). Countries used to break GATT rules with impunity. They seem to be finding it harder to do so under the WTO. Even so, protestors complain that it does not promote fair trade but does promote the interest of rich countries over poorer one. Supporters of free trade, including The Economist, reckon that all countries are better off as part of a well-regulated international trading system, and that the WTO is the most likely source of the good regulation that is needed.

Economic Terms : V

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Value added

This usually refers to FIRMS, where it is defined as the value of the firm’s OUTPUT minus the value of all its inputs purchased from other firms. It is therefore a measure of the PROFIT earned by a particular firm plus the wages it has paid. As a rule, the more value a firm can add to a product, the more successful it will be. In many countries, the main form of INDIRECT TAXATION is value-added tax, which is levied on the value created at each stage of production. However, it is paid, ultimately, by whoever consumes the finished product.

Another definition of value added refers to the change in the overall economic value of a company. This takes into account changes in the combined value of its SHARES, ASSETS, DEBT and other liabilities. Part of the pay of company bosses is often linked to how much economic value is added to the company under their management.

Value at risk

Value at risk models, widely used for RISK MANAGEMENT by BANKS and other financial institutions, use complex computer algorithms to calculate the maximum that the institution could lose in a single day’s trading. These models seem to work well in normal conditions but not, alas, during financial crises, which is arguably when it is most necessary to know how much value is at RISK.

Variable costs

Part of a firm’s production costs that changes according to how much OUTPUT it produces. Contrast with FIXED COSTS. Examples include some purchases of raw materials and workers’ overtime payments. In the long run, most costs can be varied.

Velocity of circulation

The speed with which MONEY whizzes around the economy, or, put another way, the number of times it changes hands. Technically, it is measured as GNP divided by the MONEY SUPPLY (pick your own definition). It is an important ingredient of the QUANTITY THEORY OF MONEY.

Venture capital

PRIVATE EQUITY to help new companies grow. A valuable alternative source of finance for ENTREPRENEURS, who might otherwise have to rely on a loan from a probably RISK AVERSE bank manager. The United States has by far the world’s biggest venture capital industry. Some economists reckon that this is why more innovative new firms have become successful there. As legend has it, with a bright idea, a garage to work in and some venture capital, anybody can create a Microsoft. However, the bursting of the dotcom bubble in 2000 threw American venture capital into a severe recession, damaging its reputation for financing profitable innovation.

Vertical equity

One way to keep TAXATION fair. Vertical equity is the principle that people with a greater ability to pay should hand over more tax to the GOVERNMENT than those with a lesser ability to pay. (See EQUITY and HORIZONTAL EQUITY.)

Vertical integration

Merging with a company at a different stage in the production process, for instance, a car maker merging with a car retailer or a parts supplier. Unlike HORIZONTAL INTEGRATION, it is likely to raise ANTITRUST concerns only if one of the companies already enjoys some MONOPOLY power, which the deal might allow it to extend into a new market.

Visible trade

Physical EXPORTS and IMPORTS, such as coal, computer chips and cars. Also known as merchandise trade. Contrast with INVISIBLE TRADE. (See BALANCE OF PAYMENTS.)

Volatility

The most widely accepted measure of risk in financial markets is the amount by which the price of a security swings up and down. The more volatile the price, the riskier is the security. Not least because there is no obvious alternative, economists often use past volatility to forecast the future risk of a security. However, as the saying goes, past results are not necessarily guides to future performance.

Voluntary unemployment

Unemployment through opting not to work, even though there are jobs available. This is the joblessness that remains when there is otherwise FULL EMPLOYMENT. It includes FRICTIONAL UNEMPLOYMENT as a result of people changing jobs, people not working while they undertake JOB SEARCH and people who just do not want to work.

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Uncertainty

See information.

Underground economy

See BLACK ECONOMY.

Unemployment

The number of people of working age without a job is usually expressed as an unemployment rate, a percentage of the workforce. This rate generally rises and falls in step with the BUSINESS CYCLE--cyclical unemployment. But some joblessness is not caused by the cycle, being STRUCTURAL UNEMPLOYMENT. There are also VOLUNTARY UNEMPLOYMENT and involuntary unemployment. Some people who are not in work have no interest in getting a job and probably should not be regarded as part of the workforce. Others choose to be out of work briefly while they look for, or are waiting to start, a new job. This is known as FRICTIONAL UNEMPLOYMENT. In the 1950s, the PHILLIPS CURVE seemed to show that policymakers could reduce unemployment by having higher INFLATION. Economists now say there is a NAIRU (non-accelerating inflation rate of unemployment). In most markets, PRICES change to keep SUPPLY and DEMAND in EQUILIBRIUM; in the LABOUR market, wages are often sticky, being slow to fall when demand declines or supply increases. In these situations, unemployment often increases. One way to tackle this may be to boost demand. Another is to increase LABOUR MARKET FLEXIBILITY.

Unemployment trap

When unemployed people who receive benefits, either from the GOVERNMENT or from private CHARITY, are deterred from taking a new job because the reduction or removal of benefit if they do will make them worse off. Also known as the POVERTY TRAP, it can be addressed, to an extent, by continuing to pay benefit for a while to unemployed people returning to work. (See WELFARE TO WORK.)

Unions

In developed countries, at least, trade union membership and influence has declined over the past three decades. Fewer WAGES are now set by collective bargaining, and far fewer working days are lost to strikes. Unions, which are in effect a CARTEL of workers, probably make UNEMPLOYMENT higher than it would be without them, as collective bargaining often pushes wages above the level that would bring LABOUR SUPPLY and DEMAND into EQUILIBRIUM. These higher wages increase supply and reduce demand, with the result that there are more jobless people. Unions thus deepen a conflict between those in the labour market who are insiders, that is, union members, and those who are outsiders, typically non-unionised, poorly paid or jobless people. However, unions can combat the excessive market power of some FIRMS, particularly when the firms (or a GOVERNMENT) dominate a particular job market. They can support workers who are badly treated by management. They may sometimes provide an efficient, and thus valuable, channel for communication between workers and managers, particularly in countries such as Germany, where conflict between management and unions is viewed as unhealthy.

Usury

Charging INTEREST, or, at least, an exorbitant rate of interest. Plato and Aristotle reckoned that charging interest was “contrary to the nature of things”; Cato considered it on a par with homicide. For many centuries, the Catholic Church regarded as sinful the charging of any interest by lenders and it was not allowed in Catholic countries, although Jews were exempted, provided they did not charge excessive rates. According to Pope Benedict XIV, in 1745, interest should be regarded as a sin because "the creditor desires more than he has given".

In most modern economies, interest is recognised as a crucial part of the economic system, a reward to the lender for the RISK taken in making a loan. Even so, most developed countries have some form of usury law imposing limits on how high interest charges can be. These aim to protect borrowers from being exploited by unscrupulous loan sharks.

Utility

Economist-speak for a good thing; a measure of satisfaction. (See also WELFARE.) Underlying most economic theory is the assumption that people do things because doing so gives them utility. People want as much utility as they can get. However, the more they have, the less difference an additional unit of utility will make – there is diminishing MARGINAL utility. Utility is not the same as utilitarianism, a political philosophy based on achieving the greatest happiness of the greatest number.

A tricky question is how to measure utility. MONEY does not (entirely) capture it. You can get richer without becoming more satisfied. So some economists have tried to calculate broader measures of happiness. They have found that people with jobs are much happier than unemployed people. Low INFLATION also makes people happier. Extra INCOME increases happiness a bit, but not much. In many countries incomes have risen sharply in recent years, but national surveys of subjective well being have stayed flat. Within countries, comparing people across the income distribution, richer does mean happier, but the effect is not large. Married people are often happier than single people; couples without children happier than couples with; women happier than men; white people happier than black people; well-educated people happier than uneducated people; the self-employed happier than employees; and retired people happier than economically active people. Happiness generally decreases until you are in your 30s, and then starts rising again. Other economists are dismissive of such studies. They argue that people are rational maximisers of their own utility, so, by definition, whatever they do maximises their utility.

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Tangible assets

ASSETS you can touch: buildings, machinery, GOLD, works of art, and so on. Contrast with INTANGIBLE ASSETS.

Tariff

Often used to describe a tax on goods produced abroad imposed by the GOVERNMENT of the country to which they are exported. Many countries have reduced such tariffs as part of the process of freeing up world trade.

Tax arbitrage

Creating FINANCIAL INSTRUMENTS or transactions that allow the parties involved to exploit loopholes in or differences between their tax exposures, so that all involved pay less tax.

Tax avoidance

Doing everything possible within the law to reduce your tax bill. Learned Hand, an American judge, once said: “There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible … nobody owes any public duty to pay more than the law demands.” Contrast with TAX EVASION.

Tax base

The thing or amount to which a tax rate applies. To collect INCOME TAX, for example, you need a meaningful definition of INCOME. Definitions of the tax base can vary enormously, over time and among countries, especially when tax breaks are taken into account. As a result, a country with a comparatively high tax rate may not have a high TAX BURDEN if it has a more narrowly defined tax base than other countries. In recent years, the political unpopularity of high tax rates has lead many governments to lower rates and at the same time broaden the tax base, often leaving the tax burden unchanged.

Tax burden

Total tax paid in a period as a proportion of total INCOME in that period. It can refer to personal, corporate or national income.

Tax competition

Low-tax policies pursued by some countries in the hope of attracting international businesses and CAPITAL. Economists usually favour COMPETITION in any form. But some say that tax competition is often a beggar-thy-neighbour policy, which can reduce another country’s TAX BASE, or force it to change its mix of taxes, or stop it taxing in the way it would like.

Economists who favour tax competition often cite a 1956 article by Charles Tiebout (1924–68) entitled "A Pure Theory of Local Expenditures". In it he argued that, faced with a choice of different combinations of tax and government SERVICES, taxpayers will choose to locate where they get closest to the mixture they want. Variations in tax rates among different countries are good, because they give taxpayers more choice and thus more chance of being satisfied. This also puts pressure on governments to be efficient. Thus measures to harmonise taxes are a bad idea.

There is at least one big caveat to this theory. Tiebout assumed, crucially, that taxpayers are highly mobile and able to move to wherever their preferred combination of taxes and benefits is on offer. But many taxpayers, including the great majority of workers, are not able to move easily. Tax competition may make it harder to redistribute from rich to poor through the tax system by allowing the rich to move to where taxes are not redistributive.

Tax efficient

From the point of view of the taxpayer, the way of undertaking an economic activity that results in the lowest (legitimate) tax bill.

Tax evasion

Paying less tax than you are legally obliged to. Contrast with TAX AVOIDANCE. There may be a thin line between the two, but as Denis Healey, a former British chancellor, once put it, “The difference between tax avoidance and tax evasion is the thickness of a prison wall.”

Tax haven

A country or designated zone that has low or no taxes, or highly secretive BANKS, and often a warm climate and sandy beaches, which make it attractive to foreigners bent on TAX AVOIDANCE or even TAX EVASION.

Tax incidence

Where a tax really bites. Who ultimately pays a tax is often different from who the taxman collects the tax from, because the cost of the tax can be passed on. For example, by demanding higher WAGES if INCOME TAX rises, workers can transfer some of the TAX BURDEN to their employer’s customers or shareholders.

Taxation

Prostitution may be the oldest profession, but tax collection was surely not far behind. In its early days, taxation did not always involve handing over money. The ancient Chinese paid with pressed tea, and Jivara tribesmen in Brazil stumped up shrunken heads. As the PRICE of their citizenship, ancient Greeks and Romans could be called on to serve as soldiers and had to supply their own weapons. The origins of modern taxation can be traced to wealthy subjects paying money to their king in lieu of military service.

The other early source of tax revenue was trade, with tolls and customs duties being collected from travelling merchants. The big advantage of these taxes was that they fell mostly on visitors rather than residents.

INCOME TAX, the biggest source of GOVERNMENT funds today in most countries, is a comparatively recent invention, probably because the notion of annual INCOME is itself a modern concept. Governments preferred to tax things that were easy to measure and on which it was thus easy to calculate the liability. This is why early taxes concentrated on tangible items such as LAND and property, physical goods, commodities and ships, as well as things such as the number of windows or fireplaces in a building.

In the 20th century, particularly the second half, governments around the world took a growing share of their country’s NATIONAL INCOME in tax, mainly to pay for increasingly more expensive defence efforts and for a modern WELFARE state. INDIRECT TAXATION on CONSUMPTION, such as VALUE-ADDED tax, has become increasingly important as DIRECT TAXATION on income and wealth has become increasingly unpopular.

But big differences among countries remain. One is the overall level of tax. For example, in United States tax revenue amounts to around one-third of its GDP, whereas in Sweden it is closer to half. Others are the preferred methods of collecting it (direct versus indirect), the rates at which it is levied and the definition of the TAX BASE to which these rates are applied. Countries have different attitudes to PROGRESSIVE and REGRESSIVE TAXATION. There are also big differences in the way responsibility for taxation is divided among different levels of government.

Arguably, any tax is a bad tax. But PUBLIC GOODS and other government activities have to be paid for somehow, and economists often have strong views on which methods of taxation are more or less efficient. Most economists agree that the best tax is one that has as little impact as possible on people’s decisions about whether to undertake a productive economic activity. High rates of tax on LABOUR may discouragepeople from working, and so result in lower tax revenue than there would be if the tax rate were lower, an idea captured in the LAFFER CURVE. Certainly, the MARGINAL rate of tax may have a bigger effect on incentives than the overall TAX BURDEN.

LAND TAX is regarded as the most efficient by some economists and tax on expenditure by others, as it does all the taking after the wealth creation is done.

Some economists favour a neutral tax system that does not influence the sorts of economic activities that take place. Others favour using tax, and tax breaks, to guide economic activity in ways they favour, such as to minimise pollution and to increase the attractiveness of employing people rather than CAPITAL. Some economists argue that the tax system should be characterised by both HORIZONTAL EQUITY and VERTICAL EQUITY, because this is fair, and because when the tax system is fair people may find it harder to justify TAX AVOIDANCE and TAX EVASION. However, who ultimately pays (the TAX INCIDENCE) may be different from who is initially charged, if that person can pass it on, say by adding the tax to the price he charges for his OUTPUT. Taxes on companies, for example, are always paid in the end by humans, be they workers, customers or shareholders.

Technical progress

A crucial ingredient of economic GROWTH. Economists often used to take a certain rate of technological progress for granted, but in new ENDOGENOUS growth theory they make more effort to measure accurately and better understand what causes differences in the rate of technical change.

Terms of trade

The weighted average of a country’s export PRICES relative to its import prices.

Third way

An economic philosophy espoused by some leftish political leaders in the late 20th century, including Bill Clinton and Tony Blair. According to the rhetoric, it is not CAPITALISM and not SOCIALISM, but a third (pragmatic) way. Many have therefore found it rather hard to pin down. It was earlier used to describe Sweden’s economic model.

Tick

The minimum PRICE change possible in a financial marketplace.

Tiger economies

The fast-growing developing economies of Asia, at least before their crisis in the late 1990s.

Time series

Several measurements of a variable taken at regular intervals, such as daily, monthly, quarterly, and so on. They are often used by economists in search of trends that they hope will let them predict future movements in the variable.

Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar in the hand today can earn INTEREST during the time until the future dollar is received.

Tobin, james

A Nobel prize-winning economist, James Tobin (1918-2002) theorised that FIRMS would continue to invest as long as the value of their SHARES exceeded the replacement cost of their ASSETS. The ratio of the market value of a firm to the net REPLACEMENT COST of the firm’s assets is known as “Tobin’s Q”. If Q is greater than 1, then it should pay the firm to expand, as the PROFIT it should expect to make from its assets (reflected in the share PRICE) exceeds the cost of the assets. If Q is less than 1, the firm would be better off selling its assets, which are worth more than shareholders currently expect the firm to earn in profit by retaining them.

Tobin also gave his name to the “Tobin tax”, a (so far unimplemented) proposal to reduce speculative cross-border flows of CAPITAL by levying a small tax on foreign exchange transactions.

Total return

The sum of all the different benefits from investing in an ASSET, including INCOME paid to the investor and any change in the market value of the asset. The total return is often expressed as a percentage of the amount invested.

Trade

See FREE TRADE.

Trade area

In a globalising economy, it is perhaps surprising that countries increasingly trade with their nearest neighbours. One explanation is geography: as countries have lowered their TARIFF barriers, the relatively greater importance of transport costs makes proximity matter more. According to NEW TRADE THEORY, this also produces gains from ECONOMIES OF SCALE. But another reason for the fast growth in trade among nearby countries may be less benign. The proliferation of regional trade agreements may be causing neighbours to trade with each other when it would be more efficient for them to export to and import from afar.

In the past 50 years more than 150 regional trade agreements have been notified to the GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) or the WORLD TRADE ORGANISATION (WTO), most of which are still in force. Roughly half of these, including some revisions of previous deals, have been set up since 1990. The best-known are the EUROPEAN UNION, the North American Free-Trade Agreement (NAFTA) and Mercosur in South America. There are dozens of other examples.

Economists have generally been unenthusiastic about regionalism, for two reasons. First, they worry that preferential tariffs will cause trade to flow in inefficient ways, a process known as trade diversion. In a perfect world, trade patterns should be determined by COMPARATIVE ADVANTAGE: the comparative cost of making different goods yourself as opposed to buying them from various countries. If the United States imports Mexican televisions merely because the Mexican goods are tariff-free, even if Malaysia has a comparative advantage in television manufacturing, the main benefit of trade will be lost.

The second concern is that regionalism will impede efforts to liberalise trade throughout the world. One prominent critic, Jagdish Bhagwati, an economist at Columbia University in New York, has famously said that regional trade areas are “stumbling blocks” rather than “building blocks” in the freeing of global trade. There is no clear-cut theoretical answer to the question of whether regional trade agreements are good or bad, and the empirical findings are hotly disputed. In general, though, it seems likely that it is better to have regional groups that are open to the rest of the world than groups that are closed.

Trade cycle

See BUSINESS CYCLE.

Trade deficit/surplus

An excess of IMPORTS over EXPORTS is a trade deficit. An excess of exports over imports is a trade surplus. (See BALANCE OF PAYMENTS.)

Trade unions

See UNIONS.

Trade-weighted exchange rate

A country’s EXCHANGE RATE with the currencies of its trading partners weighted by the amount of trade done by the country in each currency.

Tragedy of the commons

A 19th-century amateur mathematician, William Forster Lloyd, modelled the fate of a common pasture shared among rational, UTILITY-maximising herdsmen. He showed that as the POPULATION increased the pasture would inevitably be destroyed. This tragedy may be the fate of all sorts of common resources, because no individual, firm or group has meaningful PROPERTY RIGHTS that would make them think twice about using so much of it that it is destroyed.

Once a resource is being used at a rate near its sustainable capacity, any additional use will reduce its value to its current users. Thus they will increase their usage to maintain the value of the resource to them, resulting in a further deterioration in its value, and so on, until no value remains. Contemporary examples include overfishing and the polluting of the atmosphere. (See PUBLIC GOODS and EXTERNALITY.)

Transaction costs

The costs incurred during the process of buying or selling, on top of the PRICE of whatever is changing hands. If these costs can be reduced, the PRICE MECHANISM will operate more efficiently.

Transfer pricing

The PRICES assumed, for the purposes of calculating tax liability, to have been charged by one unit of a multinational company when selling to another (foreign) unit of the same firm. FIRMS spend a fortune on advisers to help them set their transfer prices so that they minimise their total tax bill. For instance, by charging low transfer prices from a unit based in a high-tax country that is selling to a unit in a low-tax country, a firm can record a low PROFIT in the first country and a high profit in the second. In theory, however, transfer prices are supposed to be set according to the arm’s-length principle: that they should be the same as would be charged if the sale was to a business unconnected in any way to the selling firm. But when there is no genuinely independent market with which to compare transfer prices, what an arm’s length price would be can be a matter of great debate and an opportunity for firms that want to lower their tax bill.

Transfers

Payments that are made without any good or service being received in return. Much PUBLIC SPENDING goes on transfers, such as pensions and WELFARE benefits. Private-sector transfers include charitable donations and prizes to lottery winners.

Transition economies

Former communist economies that, with varying degrees of enthusiasm, have embraced CAPITALISM.

Transmission mechanism

The process by which changes in the MONEY SUPPLY affect the level of total DEMAND in an economy.

Transparency

A buzz word for the idea that the more INFORMATION is disclosed about an economic activity the better. Many regulators, private lenders, politicians and economists reckoned that the Asian economic crisis of the late 1990s would not have been so severe, or even have happened, had Asian governments, BANKS and other companies made available more and better data about their financial condition. Likewise, the collapse of Enron provoked demands for greater transparency, to help improve corporate governance in the United States and other industrialised countries. Some economists reckon that transparency is one of the most effective methods of REGULATION. Rather than risk REGULATORY CAPTURE, why not simply maximise disclosure and leave it to the market to decide whether what the information reveals is acceptable?

Treasury bills

A form of short-term GOVERNMENT DEBT. Treasury bills usually mature after three months. They are used for managing fluctuations in the government’s short-run cash needs. Most government borrowing takes the form of longer-term BONDS.

Trough

The transition point between economic RECESSION and recovery.

Trust

One of the most valuable economic assets, hard to create but easy to destory - a crucial ingredient of a country's social capital. People are more likely to do business together when they trust each other. Trust can reduce market failure that otherwise results from asymmetric information. When there is a lack of trust, people may have to spend heavily on monitoring others' behaviour to ensure they do what they say they will do. This cost may be so high that it is not worth going ahead with a business deal. When trust is absent, people may be less flexible in their dealings with each other. Countries can overcome some of the problems of a lack of trust by passing laws requiring good behaviour, but only to the extent that people trust that the laws will be enforced. One way in which companies seek to demonstrate that they can trust is by investing heavily in a brand.

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Safe harbour

Protection from the rough seas of REGULATION. Laws and regulations often include a safe harbour clause that sets out the circumstances in which otherwise regulated FIRMS or individuals can do something without regulatory oversight or interference.

Satisficing

Settling for what is good enough, rather than the best that is possible. This may occur in any situation in which decision makers are trying to pursue more than one goal at a time. CLASSICAL ECONOMICS and NEO-CLASSICAL ECONOMICS assume that individuals, FIRMS and GOVERNMENTS try to achieve the OPTIMUM, best possible outcome from their decisions. Satisficing assumes they decide for each goal a level of achievement that would be good enough and try to find a way to achieve all of these sub-optimal goals at once. This approach to decision making is commonplace in behavioural economics. It can be regarded as a realist’s theory of how decisions are taken. The concept was invented by Herbert Simon (1916-2001), a Nobel prize-winning economist, in his book, Models of Man, in 1957.

Savings

Any INCOME that is not spent. Ultimately, savings are the source of INVESTMENT in an economy, although domestic savings may be supplemented by CAPITAL from foreign savers or themselves be invested abroad.

In an economic sense, savings include purchases of SHARES or other financial SECURITIES. However, many official measures of a country’s savings ratio--total savings expressed as a percentage of total income--leave out such financial transactions. At times when the demand for financial securities is unusually high, this can give a misleading impression of how much saving is taking place.

How much individuals save varies significantly among different age groups (see LIFE-CYCLE HYPOTHESIS) and nationalities. Everywhere, people of all ages save more as their income rises. The supply of savings rises when INTEREST rates rise; a rise in interest rates causes DEMAND for funds to invest to fall; a rise in demand for investment funds may cause interest rates, and thus the COST OF CAPITAL, to rise. The level of savings is also influenced by changes in wealth (see WEALTH EFFECT) and by TAXATION policies.

Say's law

SUPPLY creates its own DEMAND. So argued a French economist, Jean-Baptiste Say (1767–1832), and many classical and neo-classical economists since. KEYNES argued against Say, making the case for the use of FISCAL POLICY to boost demand if there is not enough of it to produce FULL EMPLOYMENT.

Scalability

The ease with which the SUPPLY of an economic product or process can be expanded to meet increased DEMAND. Recent technological advances have led some economists to talk about the growing importance of instant scalability. For example, once a piece of software has been written it can be made available in an instant over the Internet to unlimited numbers of users for almost no cost. This potentially allows a new product to enter and win market share far more quickly than ever before, intensifying COMPETITION and perhaps accelerating the process of creative destruction (see SCHUMPETER).

Scarcity

Supplies of the FACTORS OF PRODUCTION are not unlimited. This is why choices have to be made about how best to use them, which is where ECONOMICS comes in. MARKET FORCES operating through the PRICE MECHANISM usually offer the most efficient way to allocate scarce resources, with GOVERNMENT planning playing at most a minor role. Scarcity does not imply POVERTY. In economic terms, it means simply that needs and wants exceed the resources available to meet them, which is as common in rich countries as in poor ones.

Scenario analysis

Testing your plans against various possible scenarios to see what might happen should things not go as you hope. Scenario analysis is an important technique in RISK MANAGEMENT, helping FIRMS and especially financial institutions to ensure that they do not take on too much RISK. Its usefulness does of course depend on risk managers coming up with the right scenarios.

Schumpeter, joseph

After growing up in the Austro-Hungarian empire, in which he worked as an itinerant lawyer, Joseph Schumpeter (1883–1950) became an academic in 1909. He was appointed Austrian minister of finance in 1919, presiding over a period of HYPER-INFLATION. He then became president of a small Viennese BANK, which collapsed. He returned to academia in Bonn in 1925 and in the 1930s joined the faculty of Harvard.

In 1911, while teaching at Czernowitz (now in Ukraine), he wrote the Theory of Economic Development. In this he set out his theory of entrepreneurship, in which GROWTH occurred, usually in spurts, because COMPETITION and declining PROFIT inspired ENTREPRENEURS to innovate. This developed into a theory of the trade cycle (see BUSINESS CYCLE), and into a notion of dynamic competition characterised by his phrase “creative destruction”. In CAPITALISM, he argued, there is a tendency for FIRMS to acquire a degree of MONOPOLY power. At this point, competition no longer takes place through the PRICE MECHANISM but instead through INNOVATION. Perhaps because monopolies often become lazy, successful innovation may come from new entrants to a market, who take it away from the incumbent, thus blowing “gales of creative destruction” through the economy. Eventually, the new entrants grow fat on their monopoly profits, until the next gale of creative destruction blows them away.

Ever controversial, and often wrong, in his 1942 book, CAPITALISM, SOCIALISM AND DEMOCRACY, he predicted the downfall of capitalism at the hands of an intellectual elite. He is associated with both AUSTRIAN ECONOMICS and, arguably as founding father, EVOLUTIONARY ECONOMICS.

Sdr

Short for special drawing rights. Created in 1967, the SDR is the IMF's own currency. Its value is based on a portfolio of widely used currencies.

Search costs

The cost of finding what you want. The economic cost of buying something is not simply the PRICE you pay. Finding what you want and ensuring that it is competitively priced can be expensive, be it the financial cost of physically getting to a marketplace or the OPPORTUNITY COST of time spent fact-finding. Search costs mean that people often take decisions without all the relevant INFORMATION, which can result in inefficiency. Technological changes such as the internet may sharply reduce search costs, and thus lead to more efficient decision making.

Seasonally adjusted

There are seasonal patterns in many economic activities; for instance, there is less construction in winter than in summer, and spending in shops soars as Christmas approaches. To reveal underlying trends, statistics reflecting only part of the year are often adjusted to iron out seasonal variations.

Second-best theory

As we do not live in a perfect world, how useful are economic theories based on the assumption that we do? Second-best theory, set out in 1956 by Richard Lipsey and Kelvin Lancaster (1924–99), looks at what happens when the assumptions of an economic model are not fully met. They found that in situations where not all the conditions are met, the second-best situation – that is, meeting as many of the other conditions as possible – may not result in the OPTIMUM solution. Indeed, reckoned Lipsey and Lancaster, in general, when one optimal equilibrium condition is not satisfied all of the other equilibrium conditions will change.

Potentially, the second-best equilibrium may be worse than a new equilibrium brought about by GOVERNMENT intervention, either to restore equilibrium to the market that is in DISEQUILIBRIUM, or to move the other markets away from their second-best conditions.

Economists have seized on this insight to justify all sorts of interventions in the economy, ranging from taxing certain goods and subsidising others to restricting FREE TRADE. Whenever there is MARKET FAILURE, second-best theory says it is always possible to design a government policy that would increase economic WELFARE. Alas, the history of government intervention suggests that although the second best may be improved on in theory, in practice second best is often least worst.

Secondary market

A market in second-hand FINANCIAL INSTRUMENTS. BONDS and SHARES are first sold in the primary market, for instance, through an initial public offering. After that, their new owners often sell them in the secondary market. The existence of liquid secondary markets can encourage people to buy in the primary market, as they know they are likely to be able to sell easily should they wish.

Securities

Financial contracts, such as BONDS, SHARES or DERIVATIVES, that grant the owner a stake in an ASSET. Such securities account for most of what is traded in the FINANCIAL MARKETS.

Securitisation

Turning a future cashflow into tradable, BOND-like SECURITIES. Creating such ASSET-backed securities became a lucrative business for financial FIRMS during the 1990s, as they invented new securities based on cashflow ranging from future mortgage and credit-card payments to BANK loans, movie revenue and even the royalties on songs by David Bowie (so-called Bowie-bonds). Securitisation has many benefits, at least intheory. Issuers gain instant access to MONEY for which they would otherwise have to wait months or years, and they can shed some of the RISK that their expected revenue will not materialise. By selling securitised loans, investment banks are able to finance their customers without tying up large amounts of CAPITAL. Investors can hold a new sort of asset, less risky than unsecured bonds, giving them the risk-reducing benefit of DIVERSIFICATION. But there are dangers. The future cashflow underlying the securities may flow earlier or later than promised, or not at all.

Seignorage

Traditionally, the PROFIT rulers made from allowing metals to be turned into coins. Now it refers in a loosely defined way to the power of a country whose notes and coins are held by another country as a RESERVE CURRENCY.

Seller's market

A market in which the seller seems to have the upper hand and so can charge a higher PRICE than in a

Seniority

The order in which CREDITORS are entitled to be repaid. In the event of a BANKRUPTCY, senior DEBT must be paid off before junior debt. Because junior debt has a lower chance of being repaid than senior debt, it carries more RISK, and thus typically pays a higher YIELD.

Sequencing

Shorthand for implementing economic reforms in the right order. In recent years, this has become a hot topic in development economics. Some economists argue that introducing the right policies alone is not enough to revive a malfunctioning economy; reforms must be implemented in the right sequence. Thus they debate when in the reform process there should be, say, privatisation of state enterprises, and in which order, or the lifting of capital controls or other trade barriers. Other economists dispute whether there is a right sequence.

Services

Products of economic activity that you can’t drop on your foot, ranging from hairdressing to websites. In most countries, the share of economic activity accounted for by services rose steadily during the 20th century at the expense of AGRICULTURE and MANUFACTURING. More than two-thirds of OUTPUT in OECD countries, and up to four-fifths of employment, is now in the services sector.

Shadow price

The true economic PRICE of an activity: the OPPORTUNITY COST. Shadow prices can be calculated for those goods and SERVICES that do not have a market price, perhaps because they are set by GOVERNMENT. Shadow pricing is often used in COST-BENEFIT ANALYSIS, where the whole purpose of the analysis is to capture all the variables involved in a decision, not merely those for which market prices exist.

Shareholder value

Putting shareholders first; the notion that all business activity should aim to maximise the total value of a company’s SHARES. Some critics argue that concentrating on shareholder value will be harmful to a company’s other STAKEHOLDERS, such as employees, suppliers and customers.

Financial SECURITIES, each granting part ownership of a company. In return for risking their CAPITAL by giving it to the company’s management to develop the business, shareholders get the right to a slice of whatever is left of the firm’s revenue after it has met all its other obligations. This money is paid as a DIVIDEND, although most companies retain some of their residual revenue for INVESTMENT purposes. Shareholders have voting rights, including the right to vote in the election of the company’s board of directors. Shares are also known as equities. They can be traded in the public FINANCIAL MARKETS or held as PRIVATE EQUITY.

Sharpe ratio

A rough guide to whether the rewards from an INVESTMENT justify the RISK, invented by Bill Sharpe, a winner of the NOBEL PRIZE FOR ECONOMICS and co-creator of the CAPITAL ASSET PRICING MODEL. You simply divide the past RETURN on the investment (less the RISK-FREE RATE) by its STANDARD DEVIATION, the simplest measure of risk. The higher the Sharpe ratio is the better, that is, the greater is the return per unit of risk. However, as it is a backward-looking measure, based on what an investment has done in the past, the Sharpe ratio does not guarantee similar performance in future.

Shock

An unexpected event that affects an economy (see ASYMMETRIC SHOCK).

Short-termism

Doing things that make you better off in the short-run but worse off in the end. After the bursting of the stockmarket bubble and the failure of Enron at the start of the 2000s, much like during the 1980s, accusations of short-termism were often made against the stockmarket-focused CAPITALISM of the United States and the UK. During the bubble, it was claimed, investors had become too focused on short-term profits and changes in share prices, and failed to probe deeply enough into long-term performance. As a result, managers did things that made their profits look as good as possible in the short run, often to the detriment of their company's long-term health. Indeed, many firms engaged in misleading and even fraudulent accounting practices to inflate short-term profits. In the 1980s and early 1990s, the complaint took a slightly different form, and was arguably less convincing, namely that short-termism caused lower levels of INVESTMENT by businesses than in countries where the stockmarket was less important, such as Germany and Japan.

Shorting

Selling a SECURITY, such as a SHARE, that you do not currently own, in the expectation that its PRICE will fall by the time the security has to be delivered to its new owner. If the price does fall, you can buy the security at the lower price, deliver it to whoever you sold it to and make a PROFIT. The RISK is that the price rises, leaving you with a loss.

Signalling

A solution to one of the biggest sources of MARKET FAILURE: ASYMMETRIC INFORMATION. Often the biggest problem facing sellers is how to convince buyers that what they are selling is as good as they say it is. This problem arises in situations where the qualities of the thing being sold cannot be observed easily by buyers, who thus fear that sellers may be conning them. In such situations, an answer may be for sellers to do something that shows they mean what they say about quality. This something is what economists call signalling.

Going to a leading university might be worth far more for what it signals to prospective employers about your abilities than for what you learn as a student. Likewise, the fact that a firm is willing to spend a lot of MONEY ADVERTISING its product may say far more about what it thinks of the product than any information included in the actual ad. To be useful, signals must impose more costs on those who use them to send false messages than any gains to be had from lying.

Simple interest

INTEREST calculated only on the initial amount borrowed or invested. Contrast with COMPOUND INTEREST.

Smith, adam

The founder of ECONOMICS as we know it. Born in Kirkcaldy, Fife, Adam Smith (1723–90) was educated at Glasgow and Oxford, and in 1751 became professor of logic at Glasgow University. Eight years later he made his name by publishing the THEORY OF MORAL SENTIMENTS. His 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, is the bible of CLASSICAL ECONOMICS. He emphasised the role of specialisation (the DIVISION OF LABOUR), TECHNICAL PROGRESS and CAPITAL INVESTMENT as the main engines of economic GROWTH. Above all, he stressed the importance of the INVISIBLE HAND, the way in which self-interest pursued in free markets leads to the most efficient use of economic resources and makes everybody better off in the process.

Social benefits/costs

The overall impact of an economic activity on the WELFARE of society. Social benefits/costs are the sum of private benefits/costs arising from the activity and any EXTERNALITIES.

Social capital

The amount of community spirit or trust that an economy has gluing it together. The more social capital there is, the more productive the economy will be. Yet, curiously, one of the best-known books to address the role of social capital, "Bowling Alone", by Robert Putnam of Harvard University, pointed out that Americans were far less likely to be members of community organisations, clubs or associations in the 1990s than they were in the 1950s. He illustrated his thesis by charting the decline of bowling leagues. Yet the American economy has gone from strength to strength. This has led some economists to question whether social capital is really as important as the theory suggests, and others to argue that membership of bowling leagues and other community organisations is simply not a good indicator of the amount of social capital in a country.

Social market

The name given to the economic arrangements devised in Germany after the second world war. This blended market CAPITALISM, strong LABOUR protection and union influence, and a generous WELFARE state. The phrase has also been used to describe attempts to make capitalism more caring, and to the use of market mechanisms to increase the EFFICIENCY of the social functions of the state, such as the education system or prisons. More broadly, it refers to the study of the different social institutions underpinning every market economy.

Socialism

The exact meaning of socialism is much debated, but in theory it includes some collective ownership of the means of production and a strong emphasis on equality, of some sort.

Soft currency

A currency that is expected to drop in value relative to other currencies.

Soft dollars

The value of research services that brokerage companies provide “free” to INVESTMENT managers in exchange for the investment managers’ business. Economists disagree on whether or not such hidden payments are economically inefficient.

Soft loan

A loan provided at below the market INTEREST RATE. Soft loans are used by international agencies to encourage economic activity in DEVELOPING COUNTRIES and to support non-commercial activities.

Sovereign risk

The RISK that a GOVERNMENT will default on its DEBT or on a loan guaranteed by it.

Speculation

An attitude to INVESTMENT that is often criticised. According to critics, speculation involves buying or selling a financial ASSET with the aim of making a quick PROFIT. This is contrasted with long-term investment, in which an asset is retained despite short-term fluctuations in its value. Speculators actually play a valuable role in FINANCIAL MARKETS as their appetite for frequent buying and selling provides LIQUIDITY to the markets. This benefits longer-term investors, too, as it enables them to get a good PRICE when they do eventually sell.

Speculative motive

See PRECAUTIONARY MOTIVE.

Spot price

The PRICE quoted for a transaction that is to be made on the spot, that is, paid for now for delivery now. Contrast spot markets with FORWARD CONTRACTS and futures markets, where payment and/or delivery will be made at some future date. Also contrast with long-term contracts, in which a price is agreed for repeated transactions over an extended time period and which may not involve immediate payment in full.

Spread

The difference between one item and another. A much used term in FINANCIAL MARKETS. Examples are the differences between:

• the bid (what a dealer will pay) and ask or offer (what a dealer will sell for) PRICE of a share or other SECURITY;

• the price an underwriter pays for an issue of BONDS from a company and the price the underwriter charges the public;

• the YIELD on two different bonds.

Stabilisation

GOVERNMENT policies intended to smooth the economic cycle, expanding DEMAND when UNEMPLOYMENT is high and reducing it when INFLATION threatens to increase. Doing this by FINE TUNING has mostly proved harder than KEYNESIAN policymakers expected, and it has become unfashionable. However, the use of automatic stabilisers remains widespread. For instance, social handouts from the state usually increase during tough times, and taxes increase (FISCAL DRAG), boosting government revenue, when the economy is growing.

Stability and growth pact

Budgetary rules agreed to by Euro Zone countries as a condition of joining the euro. The pact stipulates that all the countries will run a balanced budget in normal times. A government that runs a fiscal deficit bigger than 3% of GDP must take swift corrective action. And if any country breaches the 3% limit for more than three years in a row, it becomes liable to fines of billions of euros. The pact was supposed to be a powerful political symbol that euro-using countries would not cheat each other. However, Portugal became the first country to break the deficit limit by notching up 4.1% in 2001. When, in 2002, France and Germany also exceeded the 3% limit, some EU members were outraged and others lobbied for the pact to be modified or even scrapped.

Stagflation

Term coined in the 1970s for the twin economic problems of STAGNATION and rising INFLATION. Until then, these two economic blights had not appeared simultaneously. Indeed, policymakers believed the message of the PHILLIPS CURVE: that UNEMPLOYMENT and inflation were alternatives.

Stagnation

A prolonged RECESSION, but not as severe as a DEPRESSION.

Stakeholders

All the parties that have an interest, financial or otherwise, in a company, including shareholders, CREDITORS, bondholders, employees, customers, management, the community and GOVERNMENT. How these different interests should be catered for, and what to do when they conflict, is much debated. In particular, there is growing disagreement between those who argue that companies should be run primarily in the interests of their shareholders, in order to maximise shareholder value, and those who argue that the wishes of shareholders should sometimes be traded off against those of other stakeholders.

Standard deviation

A measure of how far a variable moves over time away from its AVERAGE (mean) value.

Standard error

A measure of the possible error in a statistical estimate.

Statistical significance

There are lies, damned lies and statistics, said Benjamin Disraeli, a British prime minister. Certainly, even if the result of number crunching is statistically significant, it does not actually mean it is true. But it does mean it is much more likely to be true than false. Statistical significance means that the PROBABILITY of getting that result by chance is low. The most commonly used measure of statistical significance is that there must be a 95% chance that the result is right and only a 1 in 20 chance of the result occurring randomly.

Sterilised intervention

When a GOVERNMENT or CENTRAL BANK buys or sells some of its RESERVES of foreign currency this can affect the country’s MONEY SUPPLY. Selling reserves decreases the supply of the domestic currency; buying reserves increases the domestic money supply. Governments or central banks can sterilise (that is, cancel out) this effect of foreign exchange intervention on the money supply by buying or selling an equivalent amount of SECURITIES. For example, if the GOVERNMENT increases reserves by buying foreign currency the domestic money supply will increase, unless it sells securities such as TREASURY BILLS to mop up the extra DEMAND.

Sticky prices

Petrol-pump PRICES do not change every time the oil price changes, and holiday prices and standard hotel rates are fixed for months. Sticky prices are slow to change in response to changes in SUPPLY or DEMAND. As a result there is, at least temporarily, DISEQUILIBRIUM in the market. The causes of stickiness include MENU COSTS, inadequate information, consumers’ dislike of frequent price changes and long-term contracts with fixed prices. Prices change only when the cost of leaving them unchanged exceeds the expense of adjusting them. In FINANCIAL MARKETS, prices move all the time because the cost of quoting the wrong price can be huge. In other industries, the penalty may be much less severe. Small disequilibria in, say, the pricing of hotel rooms will not make much difference. So hotel prices are often sticky.

Stochastic process

A process that exhibits random behaviour. For instance, Brownian motion, which is often used to describe changes in SHARE prices in an EFFICIENT MARKET (the RANDOM WALK), is a stochastic process.

Stocks

Another term for SHARES. What are called ordinary shares in the UK are known as common stock in the United States. It is also another word for inventories of goods held by a firm to meet future DEMAND.

Stress-testing

A process for exploring how a portfolio of ASSETS and/or liabilities would fare in extreme adverse conditions. A useful tool in RISK MANAGEMENT.

Structural adjustment

A programme of policies designed to change the structure of an economy. Usually, the term refers to adjustment towards a market economy, under a programme approved by the IMF and/or WORLD BANK, which often supply structural adjustment funds to ease the pain of transition. Such policies are much criticised in the developing world, sometimes with good reason.

Structural unemployment

The hardest sort of UNEMPLOYMENT to cure because it is caused by the structure of an economy rather than by changes in the economic cycle. Contrast with cyclical unemployment, which can, in theory if not always in practice, be cut without sparking INFLATION by stimulating faster economic GROWTH. Structural unemployment can be reduced only by changing the economic structures causing it, for instance, by removing rules that limit LABOUR MARKET FLEXIBILITY.

Subsidy

MONEY paid, usually by GOVERNMENT, to keep PRICES below what they would be in a free market, or to keep alive businesses that would otherwise go bust, or to make activities happen that otherwise would not take place. Subsidies can be a form of PROTECTIONISM by making domestic goods and SERVICES artificially competitive against IMPORTS. By distorting markets, they can impose large economic costs.

Substitute goods

Goods for which an increase (or fall) in DEMAND for one leads to a fall (or increase) in demand for the other – Coca-Cola and Pepsi, perhaps.

Substitution effect

When the PRICE of petrol falls people buy more of it. There are two reasons.

• The INCOME EFFECT: cheaper petrol means that real purchasing power rises, so consumers have more to spend on everything, including petrol.

• The substitution effect: petrol has become cheaper relative to everything else, so people switch some of their CONSUMPTION out of goods that are now relatively more expensive and buy more petrol instead.

Sunk costs

When what is done cannot be undone. Sunk costs are costs that have been incurred and cannot be reversed, for example, spending on ADVERTISING or researching a product idea. They can be a barrier to entry. If potential entrants would have to incur similar costs, which would not be recoverable if the entry failed, they may be scared off.

Supply

One of the two words economists use most, along with DEMAND. These are the twin driving forces of the market economy. Supply is the amount of a good or service available at any particular PRICE. The law of supply is that, other things remaining the same, the quantity supplied will increase as the price increases. The actual amount supplied will be determined, ultimately, by what the market price is, which depends on the amount demanded as well as what suppliers are willing to produce. What suppliers are willing to supply depends on several things:

• the cost of the FACTORS OF PRODUCTION;

• technology;

• the price of other goods and SERVICES (which, if high enough, might tempt the supplier to switch production to those products); and

• the ability of the supplier accurately to forecast demand and plan production to make the most of the opportunity.

Supply curve

A graph of the relationship between the PRICE of a good and the amount supplied at different prices. (See also DEMAND CURVE.)

Supply-side policies

Increasing economic GROWTH by making markets work more efficiently. In the 1980s, Ronald Reagan and Margaret Thatcher championed supply-side policies as they attacked KEYNESIAN DEMAND management. Pumping up demand without making markets work better would simply lead to higher INFLATION; economic growth would increase only when markets were able to operate more freely. Thus they pursued policies of DEREGULATION, LIBERALISATION and PRIVATISATION and encouraged FREE TRADE. To reduce UNEMPLOYMENT, they tried to increase the EFFICIENCY of the jobs market by cutting the rate of INCOME TAX and attacking legal and other impediments to LABOUR MARKET FLEXIBILITY. The results of these programmes are much debated. In particular, the belief, apparently supported by the LAFFER CURVE, that cutting tax rates would increase tax revenue did not always stand up well to real-world testing. Even so, it is now recognised that supply-side reforms are a crucial element in an effective economic policy.

Sustainable growth

A term much used by environmentalists, meaning economic GROWTH that can continue in the long term without non-renewable resources being used up or pollution becoming intolerable. Mainstream economists use the term, too, to describe a rate of growth that an economy can sustain indefinitely without causing a rise in INFLATION.

Swap

See DERIVATIVES.

Systematic risk

The RISK that remains after DIVERSIFICATION, also known as market risk or undiversifiable risk. It is systematic risk that determines the RETURN earned on a well-diversified portfolio of ASSETS.

Systemic risk

The RISK of damage being done to the health of the FINANCIAL SYSTEM as a whole. A constant concern of BANK regulators is that the collapse of a single bank could bring down the entire financial system. This is why regulators often organise a rescue when a bank gets into financial difficulties. However, the expectation of such a rescue may create a MORAL HAZARD, encouraging banks to behave in ways that increase systemic risk. Another concern of regulators is that the RISK MANAGEMENT methods used by banks are so similar that they may increase systemic risk by creating a tendency for crowd behaviour. In particular, problems in one market may cause banks in general to liquidate positions in other markets, causing a vicious cycle of LIQUIDITY being withdrawn from the financial system as everybody rushes for the emergency exit at once. (See CAPITAL ASSET PRICING MODEL.)

Economic Terms : R

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R squared

An indicator of the reliability of a relationship identified by REGRESSION ANALYSIS. An R2 of 0.8 indicates that 80% of the change in one variable is explained by a change in the related variable.

Random walk

Impossible to predict the next step. EFFICIENT MARKET THEORY says that the PRICES of many financial ASSETS, such as SHARES, follow a random walk. In other words, there is no way of knowing whether the next change in the price will be up or down, or by how much it will rise or fall. The reason is that in an efficient market, all the INFORMATION that would allow an investor to predict the next price move is already reflected in the current price. This belief has led some economists to argue that investors cannot consistently outperform the market. But some economists argue that asset prices are predictable (they follow a non-random walk) and that markets are not efficient.

Rate of return

A way to measure economic success, albeit one that can be manipulated quite easily. It is calculated by expressing the economic gain (usually PROFIT) as a percentage of the CAPITAL used to produce it. Deciding what number to use for profit is rarely simple. Likewise, totalling up how much capital was used can be tricky, especially if it is expanded to include INTANGIBLE ASSETS and HUMAN CAPITAL. When FIRMS are evaluating a project to decide whether to go ahead with it, they estimate the project’s expected rate of return and compare it with their COST OF CAPITAL. (See NET PRESENT VALUE and DISCOUNT RATE.)

Rate of return regulation

An approach to REGULATION often used for a PUBLIC UTILITY to stop it exploiting MONOPOLY power. A public utility is forbidden to earn above a certain RATE OF RETURN decided by the regulator. In practice, this often encourages the utility to be inefficient, slow to innovate and quick to spend money on such things as big offices and executive jets, to keep down its PROFIT and thus the rate of return. Contrast with PRICE REGULATION.

Ratings

A guide to the riskiness of a FINANCIAL INSTRUMENT provided by a ratings agency, such as Moody’s, Standard and Poor’s and Fitch IBCA. These measures of CREDIT quality are mostly offered on marketable GOVERNMENT and corporate DEBT. A triple-A or A++ rating represents a low risk of DEFAULT; a C or D rating an extreme risk of, or actual, default. Debt PRICES and YIELDS often (but not always) reflect these ratings. A triple-A BOND has a low yield. High-yielding bonds, also known as junk bonds, usually have a rating that suggests a high risk of default.

A series of financial market crises from the mid-1990s onwards led to growing debate about the reliability of ratings, and whether they were slow to give warning of impending trouble. After the Enron debacle, which again the ratings agencies had failed to predict, some critics argued that the big three agencies had formed a cosy oligopoly and that encouraging more competition was the way to improve ratings.

Rational expectations

How some economists believe that people think about the future. Nobody can predict the future perfectly; but rational expectations theory assumes that, over time, unexpected events (SHOCKS) will cancel out each other and that on average people’s expectations about the future will be accurate. This is because they form their expectations on a rational basis, using all the INFORMATION available to them optimally, and learn from their mistakes. This is in contrast to other theories of how people look ahead, such as ADAPTIVE EXPECTATIONS, in which people base their predictions on past trends and changes in trends, and BEHAVIOURAL ECONOMICS, which assumes that expectations are somewhat irrational as a result of psychological biases.

The theory of rational expectations, for which Robert Lucas won the NOBEL PRIZE FOR ECONOMICS, initially became popular with monetarists because it seemed to prove that KEYNESIAN policies of DEMAND management would fail. With rational expectations, people learn to anticipate GOVERNMENT policy changes and act accordingly; since macroeconomic FINE TUNING requires that governments be able to fool people, this implies that it is usually futile. Subsequently, this conclusion has been challenged. However, rational and near-rational expectations have become part of the mainstream of economic thought.

Rationality

See ECONOMIC MAN.

Rationing

Although economists say that rationing is what the PRICE MECHANISM does, what most people think of as rationing is an alternative to letting PRICES determine how scarce economic resources, goods and SERVICES are distributed (see also QUEUEING). Non-price rationing is often used when the distribution decided by MARKET FORCES is perceived to be unfair. Rationing may lead to the creation of a black market, as people sell their rations to those willing to pay a high price (see BLACK ECONOMY).

Real balance effect

Falling INFLATION and INTEREST rates lead to higher spending (see WEALTH EFFECT).

Real exchange rate

An EXCHANGE RATE that has been adjusted to take account of any difference in the rate of INFLATION in the two countries whose currency is being exchanged.

Real interest rate

The INTEREST RATE less the rate of INFLATION.

Real options theory

A newish theory of how to take INVESTMENT decisions when the future is uncertain, which draws parallels between the real economy and the use and valuation of financial options. It is becoming increasingly fashionable at business schools and even in the boardroom.

Traditional investment theory says that when a firm evaluates a proposed project, it should calculate the project’s NET PRESENT VALUE (NPV) and if it is positive, go ahead.

Real options theory assumes that FIRMS also have some choice in when to invest. In other words, the project is like an option: there is an opportunity, but not an obligation, to go ahead with it. As with financial options, the interesting question is when to exercise the option: certainly not when it is out of the money (the cost of investing exceeds the benefit). Financial options should not necessarily be exercised as soon as they are in the money (the benefit from exercising exceeds the cost). It may be better to wait until it is deep in the money (the benefit is far above the cost). Likewise, companies should not necessarily invest as soon as a project has a positive NPV. It may pay to wait.

Most firms’ investment opportunities have embedded in them many managerial options. For instance, consider an oil company whose bosses think they have discovered an oil field, but they are uncertain about how much oil it contains and what the PRICE of oil will be once they start to pump. Option one: to buy or lease the land and explore? Option two: if they find oil, to start to pump? Whether to exercise these options will depend on the oil price and what it is likely to do in future. Because oil prices are highly volatile, it might not make sense to go ahead with production until the oil price is far above the price at which traditional investment theory would say that the NPV is positive and give the investment the green light.

Options on real ASSETS behave rather like financial options (a SHARE option, say). The similarities are such that they can, at least in theory, be valued according to the same methodology. In the case of the oil company, for instance, the cost of LAND corresponds to the down-payment on a call (right to buy) option, and the extra investment needed to start production to its strike price (the money that must be paid if the option is exercised). As with financial options, the longer the option lasts before it expires and the more volatile is the price of the underlying asset (in this case, oil) the more the option is worth. This is the theory. In practice, pricing financial options is often tricky, and valuing real options is harder still.

Real terms

A measure of the value of MONEY that removes the effect of INFLATION. Contrast with NOMINAL VALUE.

Recession

Broadly speaking, a period of slow or negative economic GROWTH, usually accompanied by rising UNEMPLOYMENT. Economists have two more precise definitions of a recession. The first, which can be hard to prove, is when an economy is growing at less than its long-term trend rate of growth and has spare CAPACITY. The second is two consecutive quarters of falling GDP.

Reciprocity

Doing as you are done by. A grants B certain privileges on the condition that B grants the same privileges to A. Most international economic agreements, for example, on trade, include binding reciprocity requirements.

Redlining

Not lending to people in certain poor or troubled neighbourhoods – drawn with a red line on a map – simply because they live there, regardless of their CREDIT-worthiness judged by other criteria.

Reflation

Policies to pump up DEMAND and thus boost the level of economic activity. Monetarists fear that such policies may simply result in higher INFLATION.

Regional policy

A policy intended to boost economic activity in a specific geographical area that is not an entire country and, typically, is in worse economic shape than nearby areas. It can include offering FIRMS incentives to provide jobs in the region, such as SOFT LOANS, grants, lower taxes, cheap LAND and buildings, subsidised LABOUR and worker training. Is it necessary? A region's problems should be somewhat self-correcting. After all, simple theories of SUPPLY and DEMAND would suggest that firms will move to areas of low WAGES and high UNEMPLOYMENT to take advantage of cheaper labour and surplus workers, or that workers will move away from such areas to where more and better-paid jobs exist. But some economic theories suggest that rather than moving to areas where wages are lowest, firms often cluster together with other successful businesses. Regional policy may need to be extremely generous to tempt firms to give up the advantages of being in a cluster.

Regression analysis

Number-crunching to discover the relationship between different economic variables. The findings of this statistical technique should always be taken with a pinch of salt. How big a pinch can vary considerably and is indicated by the degree of STATISTICAL SIGNIFICANCE and R SQUARED. The relationship between a dependent variable (GDP, say) and a set of explanatory variables (DEMAND, INTEREST rates, CAPITAL, UNEMPLOYMENT, and so on) is expressed as a regression equation.

Regressive tax

A tax that takes a smaller proportion of INCOME as the taxpayer’s income rises, for example, a fixed-rate vehicle tax that eats up a much larger slice of a poor person’s income than a rich person’s income. This goes against the principle of VERTICAL EQUITY, which many people think should be at the heart of any fair tax system.

Regulation

Rules governing the activities of private-sector enterprises. Regulation is often imposed by GOVERNMENT, either directly or through an appointed regulator. However, some industries and professions impose rules on their members through self-regulation.

Regulation is often introduced to tackle MARKET FAILURE. EXTERNALITIES such as pollution have inspired rules limiting factory emissions. Regulations on the selling of financial products to individuals have been introduced as protection against unscrupulous financial FIRMS with better INFORMATION than their customers. RATE OF RETURN REGULATION and PRICE REGULATION have been used to combat NATURAL MONOPOLY, sometimes instead of NATIONALISATION. Some regulation has been motivated by politics rather than ECONOMICS, for instance, restrictions on the number of hours people can work or the circumstances in which an employer can dismiss employees.

Even when introduced for sound economic reasons, regulation can generate more costs than benefits. Regulated firms or individuals may face substantial compliance costs. Firms may devote substantial resources to REGULATORY ARBITRAGE, which would leave consumers no better off. Regulation may lead to MORAL HAZARD if people believe that the government is keeping an eye on the behaviour of the regulated business and so do less monitoring of their own. Regulation may be badly designed and thus lock an industry into an inefficient EQUILIBRIUM. Rigid regulation may hold back INNOVATION. There is also the danger of REGULATORY CAPTURE. In short, then, REGULATORY FAILURE may be even worse for an economy than market failure.

Regulatory arbitrage

Exploiting loopholes in REGULATION, and perhaps making the regulation useless in the process. This is often done by international investors that use DERIVATIVES to find ways around a country’s financial regulations.

Regulatory capture

Gamekeeper turns poacher or, at least, helps poacher. The theory of regulatory capture was set out by Richard Posner, an economist and lawyer at the University of Chicago, who argued that “REGULATION is not about the public interest at all, but is a process, by which interest groups seek to promote their private interest ... Over time, regulatory agencies come to be dominated by the industries regulated.” Most economists are less extreme, arguing that regulation often does good but is always at RISK of being captured by the regulated firms.

Regulatory failure

When REGULATION generates more economic costs than benefits.

Regulatory risk

A RISK faced by private-sector FIRMS that regulatory changes will hurt their business. In competitive markets, regulatory risk is usually small. But in NATURAL MONOPOLY industries, such as electricity distribution, it may be huge. To ensure that regulatory risk does not deter private firms from offering their services, a GOVERNMENT wishing to change its regulations may have good reason to compensate private firms that suffer losses as a result of the change.

Relative income hypothesis

People often care more about their relative well being than their absolute well being. Someone who prefers a $100 a week pay rise when a colleague gets $50 to both of them getting a $200 increase, for example. Poor people may consume more of their INCOME than rich people do because they want to reduce the gap in their CONSUMPTION levels. The relative income hypothesis, set out by James Duesenberry, says that a household’s consumption depends partly on its income relative to other families. Contrast with PERMANENT INCOME HYPOTHESIS.

Rent

Confusingly, rent has two different meanings for economists. The first is the commonplace definition: the INCOME from hiring out LAND or other durable goods. The second, also known as economic rent, is a measure of MARKET POWER: the difference between what a FACTOR OF PRODUCTION is paid and how much it would need to be paid to remain in its current use. A soccer star may be paid $50,000 a week to play for his team when he would be willing to turn out for only $10,000, so his economic rent is $40,000 a week. In PERFECT COMPETITION, there are no economic rents, as new FIRMS enter a market and compete until PRICES fall and all rent is eliminated. Reducing rent does not change production decisions, so economic rent can be taxed without any adverse impact on the real economy, assuming that it really is rent.

Rent-seeking

Cutting yourself a bigger slice of the cake rather than making the cake bigger. Trying to make more money without producing more for customers. Classic examples of rent-seeking, a phrase coined by an economist, Gordon Tullock, include:

• a protection racket, in which the gang takes a cut from the shopkeeper’s PROFIT;

• a CARTEL of FIRMS agreeing to raise PRICES;

• a UNION demanding higher WAGES without offering any increase in PRODUCTIVITY;

• lobbying the GOVERNMENT for tax, spending or regulatory policies that benefit the lobbyists at the expense of taxpayers or consumers or some other rivals.

Whether legal or illegal, as they do not create any value, rent-seeking activities can impose large costs on an economy.

Replacement cost

What it would cost today to replace a FIRM’s existing ASSETS.

Replacement rate

The fertility rate required in a country to keep its population steady. In rich countries, this is usually reckoned to be 2.1 children per woman, the extra 0.1 reflecting the likelihood that some children will die before their parents. In poorer countries with higher infant mortality, the replacement rate may be much higher. In may countries, since the early 1990s the fertility rate has fallen below the replacement rate. There has been much debate about why, and much agreement that, if this trend continues, those countries may face long-term problems such as a relatively growing proportion of retired older people having to be supported by a relatively shrinking proportion of younger people.

Repo

An agreement in which one party sells a security to another party and agrees to buy it back on a specified date for a specified PRICE. CENTRAL BANKS deal in short-term repos to provide LIQUIDITY to the FINANCIAL SYSTEM, buying SECURITIES from BANKS with cash on the condition that the banks will repurchase them a few weeks later.

Required return

The minimum EXPECTED RETURN you require from an INVESTMENT to be willing to go ahead with it.

Rescheduling

Changing the payment schedule for a DEBT by agreement between borrower and lender. This is usually done when the borrower is struggling to make payments under the original schedule. Rescheduling can involve reducing INTEREST payments but extending the period over which they are collected; putting back the date of repayment of the loan; reducing interest payments but increasing the amount that has to be repaid eventually; and so on. The rescheduling may or may not require the lender to bear some financial loss. The rescheduling may or may not require the lender to bear some financial loss. The rescheduling of loans to countries usually takes place through the Paris Club and London Club.

Reservation wage

The lowest WAGE for which a person will work.

Reserve currency

A foreign currency held by a GOVERNMENT or CENTRAL BANK as part of a country’s RESERVES. Outside the United States the dollar is the most widely used reserve currency. Everywhere the EURO is increasingly widely used.

Reserve ratio

The fraction of its deposits that a BANK holds as RESERVES.

Reserve requirements

Regulations governing the minimum amount of RESERVES that a BANK must hold against deposits.

Reserves

MONEY in the hand, available to be used to meet planned future payments or if some other need arises. FIRMS may put their reserves in a BANK, as a deposit. For a bank, reserves are those deposits it retains rather than lending them out.

Residual risk

When you buy an ASSET you become exposed to a bundle of different RISKs. Many of these risks are not unique to the asset you own but reflect broader possibilities, such as that the stockmarket average will rise or fall, that INTEREST rates will be cut or increased, or that the GROWTH rate will change in an entire economy or industry. Residual risk, also known as alpha, is what is left after you take out all the other shared risk exposures. Exposure to this risk can be reduced by DIVERSIFICATION. Contrast with SYSTEMATIC RISK.

Restrictive practice

A general term for anything done by a firm, or FIRMS, to inhibit COMPETITION. Generally against the law. (See ANTITRUST and CARTEL.)

Returns

The rewards for doing business. Returns usually refer to PROFIT and can be measured in various ways (see RATE OF RETURN and TOTAL RETURNS).

Revealed preference

An example of a popular joke among economists: two economists see a Ferrari. “I want one of those,” says the first. “Obviously not,” replies the other. To get a smile out of this it is necessary (but not, alas, sufficient) to know about revealed preference. This is the notion that what you want is revealed by what you do, not by what you say. Actions speak louder than words. If the economist had really wanted a Ferrari he would have tried to buy one, if he did not own one already.

Economists have three main approaches to modelling DEMAND and how it will change if PRICES or INCOMES change.

• The cardinal approach involves asking consumers to say how much UTILITY they get from consuming a particular good, aggregating this across all goods and SERVICES, and calculating how demand would change on the assumption that people will consume the combination of things that maximises their total utility.

• The ordinal approach does not require consumers to say how much utility they get in absolute terms from consuming a particular good. Instead, it asks them to indicate the relative utility they get from consuming one item compared with another, that is, to say if they prefer one basket of goods to another, or are indifferent between them.

• The third approach is revealed preference. To model demand it is only necessary to be able to compare an individual’s CONSUMPTION decisions in situations with different prices and/or incomes and to assume that consumers are consistent in their decisions over time (that is, if they prefer wine to beer in one period they will still prefer wine in the next).

Ricardian equivalence

The controversial idea, suggested by David RICARDO, that GOVERNMENT deficits do not affect the overall level of DEMAND in an economy. This is because taxpayers know that any DEFICIT has to be repaid later, and so increase their SAVINGS in anticipation of a tax bill. Thus government attempts to stimulate an economy by increasing PUBLIC SPENDING and/or cutting taxes will be rendered impotent by the private-sector reaction.

Ricardo, david

The third of 17 children of a wealthy banker, David Ricardo (1772–1823) was disinherited at the age of 21 after he married a Quaker against the wishes of his parents. He became a stockbroker and did so well that he retired at 42 to concentrate on writing and politics.

A friend of fellow classical economists Thomas Malthus and Jean-Baptiste Say (see SAY'S LAW), he developed many economic theories that are still in use today. The most influential was COMPARATIVE ADVANTAGE, the theory underpinning the case for FREE TRADE. In his 1817 book, The Principles of Political Economy and Taxation, he outlined a theory of distribution of output in an economy. In this he argued that the allocation of factors of production to any area of economic activity is determined by the level of economic RENT that can be earned from it. As this gradually falls because of DIMINISHING RETURNS, CAPITAL and other resources shift to more profitable projects. He examined the split between WAGES and PROFIT, arguing that “there can be no rise in the value of LABOUR without a fall of profits”. He also claimed that changes in the GOVERNMENT DEFICIT did not affect the level of DEMAND in the economy (RICARDIAN EQUIVALENCE).

Risk

The chance of things not turning out as expected. Risk taking lies at the heart of CAPITALISM and is responsible for a large part of the GROWTH of an economy. In general, economists assume that people are willing to be exposed to increased risks only if, on AVERAGE, they can expect to earn higher returns than if they had less exposure to risk. How much higher these EXPECTED RETURNS need to be depends partly on the PROBABILITY of an undesirable outcome and partly on whether the risk taker is RISK AVERSE, RISK NEUTRAL or RISK SEEKING.

During the second half of the 20th century, economists greatly improved their understanding of risk and developed theories of RISK MANAGEMENT, which suggest when it makes sense to use INSURANCE, DIVERSIFICATION or HEDGING to change risk exposures.

In FINANCIAL MARKETS the most commonly used measure of risk is the volatility (or STANDARD DEVIATION) of the PRICE of, or more appropriately the TOTAL RETURNS on, an ASSET. Often added to the risk profile are other statistical measures such as skewness and the possibility of extreme changes on rare occasions. (See STRESS TESTING, SCENARIO ANALYSIS and VALUE AT RISK.)

Risk averse

Someone who thinks RISK is a four-letter word. Risk-averse investors are those who, when faced with two investments with the same EXPECTED RETURN but two different risks, prefer the one with the lower risk.

Risk management

The process of bearing the RISK you want to bear, and minimising your exposure to the risk you do not want. This can be done in several ways: not doing things that carry a particular risk; HEDGING; DIVERSIFICATION; and buying INSURANCE.

Risk neutral

Someone who is insensitive to RISK. Risk-neutral investors are indifferent between an INVESTMENT with a certain outcome and a risky investment with the same EXPECTED RETURNS but an uncertain outcome. Such people are few and far between.

Risk premium

The extra RETURN that investors require to hold a risky ASSET instead of a risk-free one; the difference between the EXPECTED RETURNS from a risky INVESTMENT and the risk-free rate. (See EQUITY RISK PREMIUM.)

Risk seeking

Someone who cannot get enough RISK. Risk-seeking investors prefer an INVESTMENT with an uncertain outcome to one with the same EXPECTED RETURNS and certainty that it will deliver them.

Risk-free rate

The RATE OF RETURN earned on a risk-free ASSET. This is a crucial component of MODERN PORTFOLIO theory, which assumes the existence of both risky and risk-free assets. The risk-free asset is usually assumed to be a GOVERNMENT BOND, and the risk-free rate is the YIELD on that bond, although in fact even a Treasury is not entirely without risk. In modern portfolio theory, the risk-free rate is lower than the EXPECTED RETURN on the risky asset, because the issuer of the risky asset has to offer RISK AVERSE investors the expectation of a higher return to persuade them to forgo the risk-free asset.

Economic Terms : Q

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Q theory

See TOBIN.

Quantity theory of money

The foundation stone of MONETARISM. The theory says that the quantity of MONEY available in an economy determines the value of money. Increases in the MONEY SUPPLY are the main cause of INFLATION. This is why Milton FRIEDMAN claimed that “inflation is always and everywhere a monetary phenomenon”.

The theory is built on the Fisher equation, MV = PT, named after Irving Fisher (1867–1947). M is the stock of money, V is the VELOCITY OF CIRCULATION, P is the average PRICE level and T is the number of transactions in the economy. The equation says, simply and obviously, that the quantity of money spent equals the quantity of money used. The quantity theory, in its purest form, assumes that V and T are both constant, at least in the short-run. Thus any change in M leads directly to a change in P. In other words, increase the money supply and you simply cause inflation.

In the 1930s, KEYNES challenged this theory, which was orthodoxy until then. Increases in the money supply seemed to lead to a fall in the velocity of circulation and to increases in real INCOME, contradicting the classical dichotomy (see MONETARY NEUTRALITY). Later, monetarists such as Friedman conceded that V could changein response to variations in M, but did so only in stable, predictable ways that did not challenge the thrust of the theory. Even so, monetarist policies did not perform well when they were applied in many countries during the 1980s, as even Friedman has since conceded.

Quartile

Part of the “ile” family that signposts positions on a scale of numbers (see also PERCENTILE). The top quartile on, say, the distribution of INCOME, is the richest 25% of the POPULATION.

Queueing

Market failure? Not necessarily. Usually a queue reflects a PRICE that is set too low, so that DEMAND exceeds SUPPLY, so some customers have to wait to buy the product. But a queue may also be the result of deliberate rationing by a producer, perhaps to attract attention – by a restaurant that wants to appear popular, say. Customers may regard a queue, such as a waiting list for health treatment, as a fairer way to distribute the product than using the PRICE MECHANISM.

Quota

A form of PROTECTIONISM. A country imposes limits on the number of goods that can be imported from another country. For instance, France may limit the number of cars imported from Japan to, say, 20,000 a year. As a result of limiting SUPPLY, the PRICE of the imported good is higher than it would be under FREE TRADE, thus making life easier for domestic producers.