Lower Bank Rates to Stimulate the Economy

For the first time in history, the bank rate charged by the Bank of England stands at 0.5%, the sixth straight cut to the rate in an effort to revive the sagging economy. Another policy introduced by the bank is that of quantitative easing, which means the bank will place more money in the system to the tune of £75 billion.

This expansion of the monetary system is not expected to produce immediate results, however. According to Mervyn King, the governor of the Bank of England, the policy is a long term one that is expected to work “eventually.” He said that he has no idea how long the process will take, “but if countries work together, these measures will I believe eventually work.”

The bank Chancellor, Alistair Darling, claims that such measures by the bank are “absolutely essential” if the UK is to recover from the economic downturn that this recession has caused. He did say that UK consumers who had savings in accounts at the bank would suffer in terms of the amount of interest they will realize on the money, but that the bank has to look out for the interests of all customers and the economy of the country in general.

Through its plan for quantitative easing, the Bank of England will put more money into circulation. The initial amount is set at £75 billion, but this could double if necessary. Through this process, the commercial banks will have more money available for borrowers, making it easier for consumers to obtain approval for loans.

Although some interpret the system of quantitative easing as printing new money, this is not the plan of the Bank of England. No new banknotes will be printed. Instead, the Bank of England plans to purchase more assets, such as “government securities and corporate bonds.”

Financial analysts were surprised that the bank had agreed to put such a small amount of money into circulation, but at the same time they were pleased that it had taken this step. According to Philip Shaw, Investec’s chief economist, the plan of the bank should encourage lenders to extend loans to the private sector, such as households and businesses in order to stock “monetary growth and stimulate activity.”

In a letter dated February 17, 2009, Mr, King requested Mr. Darling’s permission to start the process of quantitative easing. In granting the permission, Mr. Darling said that such a measure was appropriate given the current financial circumstances.

The rate cuts by the Bank of England have also come under attack. On the day of the announcement, the FTSE 100 index fell by 3.1% and the pound fell to $1.4090 against the dollar. Businesses are not in agreement with the cut to interest rates saying that it will not lead to more loan approvals and will damage the savings of consumers unfairly.

The Council of Mortgage Lenders is one of the business associations not in agreement with this latest cut in the bank rate. Michael Coogan, the director general of the association, said that “This latest cut presents immense challenges for lenders whose margins are already squeezed as a result of previous reductions, leaving little scope to lower discretionary mortgage rates further.” This is because the banks depend on the savings of their consumers and unless they can offer competitive rates to these people, they will not have the ability to approve mortgages for new homeowners.

A chief economist with CBI, Ian McCafferty, doubts whether this latest cut will have any dramatic impact on the cost of borrowing or the ease of obtaining a loan. Even though the consumer price index has fallen in recent months, it is still above the target of 2% set by the government.

No Credit Check Auto Loan

A no credit check auto loan provides a great opportunity for the consumer with poor financial standing to receive the vehicle of their dreams. Although not quite as prevalent as regular car loans, an individual can find no credit check car loans if they look hard enough. They give those who have been down on their luck, a second chance, and give those who have no credit, a first chance. One of the things that a person can expect when getting a no credit check auto loan is to be prepared to make a fairly sizable down payment. Even with that, no credit check car loans are for those who have had problems in their past, but who want to start back on the right track. Maybe they were out of work, but have a new job and need a car to get back and forth to work in. Everyone deserves a break now and then. That is what these programs can do.Even though a person may have the lack of a good financial record and have little choice but to deal with only a small percentage of lenders, does not mean that they have to settle for any no credit check auto loan. The consumer should shop around and make sure that the best deal is received. The FCIC says that a car payment should only be twenty percent of what the individual has left after excluding living expenses from income. It is important for the consumer not to try to live beyond his or her means, no matter how good it may sound or how much a lender tries to press this. It is of utmost importance to be smart when looking at no credit check car loans.Another point to think about when considering the purchase of a car is whether or not the tag, taxes, and title are included in the final price. Sometimes a lender will include them in a loan, and sometimes they won't. The consumer has the responsibility to make sure that they can cover the costs if the lender does not. No credit check car loans can be just the opportunity a person has been waiting for; they just need to make sure that there is a plan in place to keep payments up to date, so that, eventually the consumer will be in good financial standing.The fees, terms, and conditions of lending programs will vary from one lender to another. It may seem more economical to have a no credit check auto loan spread out over a long period so payments are lower, but there is a drawback to that. A tremendous amount of money is being added onto the amount in the form of interest. While the payments are smaller, there are many more payments to make. "For all have sinned, and come short of the glory of God;" (Romans 3:23) Jesus has given everyone a second chance, and so will these lending programs that offer funding to even those people in terrible financial shape.

Getting Bank Loans when you are Self Employed

There was a time when being self-employed meant that you would have a very hard time ever getting any credit from a bank. This was pretty much accepted as one of the downsides to self-employment that would go hand in hand with all the benefits such as freedom to control your own working life and only answering to yourself. It is however, still the case that for people who are new to self-employment and cannot prove a steady income over at least a year or more, it can be very difficult to get loans. However, if you’ve been operating successfully for even just a year, you will start to find that banks are more than willing to consider your circumstances and give you a fair shot at proving your credit worthiness.There is a strong view that being self-employed offers less security than being employed by a well respected and trusted large company. However, this perception is also changing. Gone are the days when people were employed by the same company for their entire working life, where they would gradually work their way up the corporate ladder and retire to a secure pension. Banks are increasingly aware that the employment landscape has changed enormously in recent years and that self-employment, free lance work and other such ‘alternative’ working arrangements are becoming more and more attractive and necessary for a growing number of workers. All this means that lenders are more willing than ever to consider self-employed workers for loans. The terms and rates for such loans are improving dramatically so that now, they are offered on virtually identical terms to those offered to traditionally employed workers. Therefore, if you are self-employed, you are now just as likely to be approved for a mortgage as anyone else. The same basis will be applied to determine the amount of the loan you are eligible for, namely earnings. Also, as more and more people are beginning to see the advantages to setting up in business by themselves, banks are beginning to view this area of the market as an important source of customers. Thus, competition is increasing. This can only be good news for those who are self-employed and are trying to get credit. As competition increases, the loans on offer and the terms and conditions that govern them, will get ever more attractive. Prices and interest rates will come down and getting a loan will be every bit as possible for the self-employed as it is for the traditionally employed.

Bank Loan

Where to go to get a fair deal on a bank loan
A bank loan is now available from an increasingly broad range of lenders, but the interest rates vary wildly too. To get a good rate, you need to think about what the loan is for, what your credit record is like, and whether you need extras like repayment insurance.
A bank loan is an amount of money agreed with the bank that you borrow, and repay with interest across an agreed term. Usually, you’ll pay equal monthly instalments- part of which is the loan amount, and part of which is interest. So you will pay back more than you originally borrowed. Personal loans are usually economical up to 5 years- (although many banks will lend across up to 7 years). Thereafter consider a home loan if you have equity in your house. Before getting a bank loan consider carefully whether you need to borrow, and what it’s for. Debt consolidation, for example, can cost dearly- so be sure to get the best rate.You can get a bank loan from plenty of places- not just banks. Supermarkets like Tesco and Sainsbury’s have banking arms which will lend to you. Consider also internet banks like Cahoot, Smile or First Direct. Finally, if you’re in credit difficulties, there are specialist lenders like Purple Loans who can also help.Note that the interest rate you pay on your bank loan will not necessarily be the one you see quoted in literature. Usually the rate is based on your creditworthiness, which will be ascertained partly on your credit history (this is known to most financial organisations) and partly on the information you give on your application form. If you’re deemed to have good credit, you’ll get a lower interest rate than a bad debtor. If you’re refused credit, the bank won’t have to tell you why; but you do have the right to see your credit record, which is held at credit reference agencies like Experian. It usually costs £2, and if your record is wrong, you can have it changed free of charge.

Google buys Doubleclick for $3bn

Search engine giant Google has agreed to buy web advertising network Doubleclick in a $3.1bn (£1.6bn) deal.
The cash buyout, the biggest in Google's history, will allow the company to tighten its grip on the advertising market.
Doubleclick helps link up advertising agencies, marketers and web site publishers hoping to put ads online.
In recent years, Google has been expanding into print, radio, video, mobile and TV ad markets.
News of the deal comes just six months after Google paid $1.65bn for video sharing website YouTube.
'Improved service'
"It has been our vision to make internet advertising better - less intrusive, more effective, and more useful," said Google co-founder and president Sergey Brin.
"Together with Doubleclick, Google will make the internet more efficient for end users, advertisers, and publishers."
According to reports, Google was not the only company hoping to take over Doubleclick.
Microsoft, Yahoo and Time Warner were all said to be considering bids for the firm.
New York-based Doubleclick has been majority-owned by private equity firm Hellman & Friedman since 2005, when the group paid $1.1bn for its stake.
JMI Management is a co-investor in the company, which has more than 1,500 corporate clients.
The boards of both companies have approved the takeover, which is expected to be completed by the end of the year.

G7 ministers confident on growth

Finance chiefs from the world's leading industrial nations say world growth will remain firm despite some risks.
The Group of Seven (G7) believes economic growth will hold steady, with the US economy solid despite moderating demand, and the euro zone healthy.
The International Monetary Fund (IMF) forecasts predict global growth of 4.9% in 2007 and 2008.
The Washington meeting of finance chief and central bankers is a prelude to wider IMF and World Bank talks.
Excess volatility
"Although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced," the central bank presidents and finance ministers said in a joint statement.
US Treasury Secretary Henry Paulson, who led the talks, said that risks remained for the world economy.
He said these include high and volatile fuel prices, increased protectionist measures and the vulnerability of global financial markets.
But despite these risks, the G7 finance ministers said that the outlook for the world economy remained generally rosy, led by strong growth in Asia, driven by China and India.
Economic growth in the region is expected to come in at 7% this year, slightly down from the 7.4% growth experienced last year.
The ministers appealed to China to allow its yuan currency to trade more freely on global exchange markets, saying the excessive volatility was undesirable.
"In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments can occur," the finance chiefs said.
Divisions remain
China is not attending the G7 session in Washington, as its ministers have done as guests on several occasions in the past.
The decision is thought to be linked to friction over an intellectual property rights row between Beijing and Washington.
The G7 ministers remained divided on a number of subjects - including currency volatility, protectionism and regulation of the trillion-dollar hedge fund industry.
Germany has been calling for tighter regulations to control hedge funds, claiming that should one major hedge fund collapse it could have severe consequences for global finances.
Over the past year, international concern has grown over the level of risk investors are exposed to by the lightly-regulated investment schemes, which as both high-return and high-risk are popular with wealthy investors.
However, both the US and IMF have resisted calls for tighter regulation of the sector, claiming that market forces are sufficient means to control it.

OIL

Raymond J. Lwarsy has written a book memorable in the sense that nightmares can be memorable, but also useful. If the nightmare is that you died of a drug overdose, and the memory of it causes you when in command to draw back from the marginal dose, then the nightmare has served a purpose. Learsy writes (his book is called Over a Barrel: Breaking the Middle East Oil Cartel) about what could happen if we continue to go as we are going. The price of gasoline today is 60 percent higher than it was a year ago. Such data require extrapolation.
After 200 pages of history and analysis, telling the story of the founding of OPEC, of manipulations and broken promises and extortion and opportunism, Learsy acknowledges OPEC's success. Sixty-dollar-a-barrel oil is certainly a success, but the body on which it feeds does not expand, pari passu, with the successes of OPEC. It does not matter how much you consume, if the supplies are inexhaustible and your capacity, insatiable. But here is what we might be facing if oil rose to $100 per barrel.
I quote from the author. Commuters suddenly forced to pay $2.50 or more for a gallon of gas began to brown-bag their lunches, inching away from restaurants. Americans who could afford a vacation went on shorter trips, putting a dent in the tourist industry. Trucking companies hauling everything from wines to furniture imposed a hefty surcharge on shippers, who passed it on to their customers, who then passed it farther down the line to the retail buyer if they could.
The crunch forced many independent truckers to sell their rigs, playing havoc with shipping. Higher fuel costs sent the U.S. Postal Service deeper into the red and threatened the survival of FedEx and UPS. With the break-even point for airlines a distant memory at $31 a barrel, sharp fare boosts were the only option. Traffic spiraled into a tailspin, and one airline after another declared bankruptcy.
But of course, oil is vital to everything from plastic picnic forks to printer's ink. Manufacturers raised prices across the board, and potholes went unfilled in city streets. Municipal and factory employees were laid off or fired. Foodstuffs of every kind reflected the higher costs incurred by growers and shippers.
Runaway prices on just about everything took the Federal Reserve Board by surprise. Determined to keep interest rates low, the Fed's governors were ill-prepared for the economic crisis. The Fed belatedly boosted interest rates 2 percentage points. The heretofore unheard-of move jammed on the economic brakes so swiftly that you could almost smell the stink of burning rubber. Higher mortgage rates stopped would-be home buyers dead in their tracks. The real-estate market crashed, wiping out billions of dollars of paper profits and putting holders of adjustable-rate mortgages and home-equity loans in peril. Foreclosures and tax-default auctions became common, consumer spending dried up, and soon the entire world was in a recession.
The rise in oil prices is not a fancy of Ray Learsy, and the unpredictability of that rise manifestly requires self-protection. How?
Again, quoting from the author. First, we must cut back energy usage by taking steps to control demand (just as OPEC works to control supply). Second, we must become energy self-reliant.
We should use the Strategic Petroleum Reserve (700 million barrels) to douse incendiary shoots of inflationary fire. Those uses of national oil would be loans, not grants; repayable in kind, when the price of oil had stabilized.
We will need to encourage alternative energy sources while adopting a voucher-based gas-distribution program. For the duration of the emergency, gas users would have access to magnetic debit cards in which were embedded a national quarterly target of per-consumer gasoline. Drivers whose allotted amount of gas didn't meet their needs could buy part or all of someone else's allotment. For the average driver, this distribution plan would not increase gasoline costs. A consumer would pay the same out-of-pocket cash per gallon, and the government wouldn't get its hands on any more of the taxpayers' dollars. It is a more efficient way of distributing energy because it employs market incentives to allow heavier gasoline users to get what they need without increasing overall consumption of energy.
It was 20 years ago that the Saudis and the U.S. arrived at a deal. The Saudis would set prices so as to protect the U.S. oil industry. And the U.S. would protect the Saudis' independence. We regret that, and should make the Saudis regret it also.

Banking on the poor: banker wins Nobel peace prize for loans to poor

DHAKA, Bangladesh--Millionaire banker Muhammad Yunus will never forget the famine that struck Bangladesh in 1974. He was teaching economics at a university near the nation's capital. "Hungry people were everywhere. Often they sat so still that one could not be sure whether they were alive or dead. They all looked alike: men, women, children. Old people looked like children, and children looked like old people," he wrote in Banker to the Poor, a book he coauthored.
As the famine got worse, Yunus remembers, he had a hard time teaching abstract economic theories. "Nothing ... I taught reflected the life around me."
While visiting the village of Jobra, he met a 21-year-old mother of three named Sufia Begum, who was selling bamboo stools she'd woven by hand. She told Yunus she had borrowed the equivalent of 9 cents from a village moneylender to buy the materials for each stool. But the moneylender charged such a high interest rate, she made only 2 cents per stool after she paid back the loan. (Interest is a charge for a loan, usually a percentage of the amount borrowed.)
Yunus learned that many of the women in the village owed the same moneylender a total of $27. Yunus gave them the money out of his own pocket. By eliminating the money-lender and high interest fees, the women made more money and repaid their loan to Yunus in full.
Yunus then realized that poor people can be as creditworthy as the rich. And he wanted to do more. In 1983, he founded Grameen Bank to make small loans to poor villagers. Since his loan to the women of Jobra, Yunus and Grameen have made $5.72 billion in small loans to more than 6.6 million Bangladeshis, most of them women.
For their work, Yunus and Grameen Bank recently won the prestigious Nobel Peace Prize. Half of the $1.4 million prize will go to Yunus; the other half will go to Grameen Bank.
The Nobel Prize committee says it honored Yunus because "lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty."
Poverty is rampant in Bangladesh. Half of the country's approximately 150 million people earn less than $1 a day. Most of the Grameen loans are tiny--some as little as $12. Though the loans are small, they aren't easy to get. Because borrowers have no collateral to borrow against, they must pledge to follow a strict set of rules, including a vow never to be late with a payment. Loans are made only to groups of five or more people. If one person doesn't make a payment, the entire group loses its credit rating--and cannot get another loan. Payments are small but frequent.
Ahmena Khatoon used her loan to buy two rickshaws (transportation vehicles). She rents them to villagers who pay a small fee. "I had a baby to feed, no job, no income. So I joined a unit of 41 other women who took out loans from Grameen," she told the Chicago Tribune. "We all have our own businesses. One bought chickens, another a cow, and someone else breeds fish."
Though the terms of the loans are strict, Khatoon thinks they help the Grameen system work. "If the bank was not so tough, all of us would have defaulted a long time ago. Then we would all be poor again," she says.
Khatoon says having her own business gives her a sense of pride and confidence. The majority of Grameen loans go to women because Yunus set out to help women thrive in the extremely male-dominated society. He has found that women in Bangladesh are more likely than men to use their earnings to help their families and pay back their loans.
Since its founding, Grameen Bank has inspired similar loan programs in 100 countries and has been copied by thousands of institutions.
Yunus hopes that his winning the Nobel Peace Prize will call attention to the problem of poverty. He says he wants people to "start believing we can create a poverty-free world."
Yunus told London's Independent that one day "our grandchildren will go to museums to see what poverty was like."
Critical Thinking ... What are some other ways to help eradicate poverty around the world?