Archive for February 23, 2012

Inflationary pressures to stimulate efficiency?

Under a fiat currency regime, the purchasing power of currency will continuously be devalued over time as new currency is printed to settle previous debts. In an ideal world, productivity and growth will increase proportionally with the nation’s money supply. Thus the value of money remains stable and static.

Unfortunately, since the dawn of mankind, this theory has never been realized as debt has always superseded productivity under this monetary policy. This is often counter balanced by increasing the money supply in the hopes that new businesses and thus productivity will grow.

What about efficiency of production? Towards the middle of a crisis, innovation is spurred as the cost of living increases and businesses are encouraged to cut costs while maintaining quality. Assets that are were once used by larger companies, now bankrupt, are bought by new smaller companies and they usually utilize these resources with great efficiency to survive the current economic crisis.

This can be seen today as automobiles move into smaller, technologically advanced engines. Outsourcing is booming to reduce costs from all areas of a business. One internet marketing company did a study where they found a trend in advertising towards increased R.O.I. Many companies have shifted their marketing budgets away from traditional marketing mediums like T.V, print, radio and moving towards online media such as search engine optimization, media buying and social media. This paradigm shift is simple to explain; the cost of customer acquisition is significantly cheaper through online methods where R.O.I’s can be as high as three times more than traditional media.

Clearly the future looks bright even though the current economic climate does not seem so. Like the years before us, the free market will eventually balance itself and this moment of hardship is simply that: a moment.

What Does Nicaragua’s HIPC Status Mean For Real Estate Investors?

HIPC is a program started by the IMF and World Bank in the 90’s. It is short for Highly Indebted Poor Countries and Nicaragua joins 39 other poor countries with ongoing debt obligations that are eligible for financial assistance and debt relief under the initiatives.

Although the initiative has been criticized by sister organizations such as Jubilee USA as being overly restrictive and inflexible, most economic commentators agree that the program overall has had a positive effect on Nicaragua since in joined in 2000.

Nicaragua’s economy is doing well, despite being buffeted by the financial crisis of 2009. In fact in 2011 it is reported as having the fastest growing economy in Central America. (Yes even beating Panama with its much heralded growth friendly policies). Foreign direct investment is growing rapidly and exports are on the rise. A strong, stable economy is always a positive for Nicaragua real estate investors.

But we must be careful not to overstate things. Nicaragua real estate investors need to understand that by its very inclusion in HIPC, Nicaragua is one of the poorest countries in the Western Hemisphere. They are investing in an emerging market. Yes there is plenty of room for upside, but there is also a great deal of distance to travel before the market can be considered a mature ones. Many areas of the country still lack good infrastructure such as paved roads, and good quality water and electricity supply.

On the other hand Nicaragua also one of the lowest living costs in the region. For US retirees who are finding it hard to pay for a comfortable retired life in the US, making a move is increasingly tempting. Expatriates living in Granada and San Juan del Sur, two of the most popular tourism and real state destinations in the country, report being able to fund a luxury lifestyle complete with full time maid for under US$1000 each month.

My Transition from Debt Hell to Credit Heaven – Was Most Usual

Before I begin I would like to state how important the work of this website is.  It strong stance on anti debt legislation, should be applauded and doubtlessly helps thousands of vulnerable people avoid and reduce debt misery every month.

Now a bit about my story, after almost twenty years operating company of that handled carpet cleaning Glasgow. I thought I was well versed in cash flow and the perils of compound interest.  Sadly when I sold by carpet cleaning business, something strange came over me and I temorally lost all sense of money and value.  So, quickly I got used to having money and being able to throw it about. When previously I had watched every penny and meticulously recorded every singe bottle of carpet shampoo that I purchased, all of a sudden I was throwing money away.

I gave far too much money away to relatives and friends.  Anyone that I vauguely knew who came to me with a sob story or half a busness plan was walking away with a cheque.  I got so used to this that slowly I began to believe that if I didn’t give my money away people would dislike me and start talking about me.

This unhealthy correlation between spending money and affection grew and grew.  When my money was almost spend, it really began to bite and gnaw away at me.  I became paranoid that if the rounds of drinks down the pub, the holidays for family members and the charitable gifts dried up, my friends would turn on me.  Looking back I took the unbelievable step of borrowing money to continue the spending.  After I spend a vast amount of money that literally took me a life time to earn, I foolishly borrowed the same amount of money again.  Knowing at some level I would never be able to repay it.

As you can imagine it all back fired and my friends did turn on me when the cheques started bouncing and investment in their companies never materialised.  I paid the price and eventually learnt my lesson through this website.

I urge your to take head of this advice.

Why Are We in Debt? The Answer is Simple

For this post, I am only going to focus on personal debt; government debt deserves a series of posts all on it’s own and is not as easily tackled as personal finance can be.

Why are so many people in debt? Because we buy too much.

The answer really is that simple. We are a country of consumers. We are marketed to online, in magazines, and on the radio. Our TVs are filled with reality shows that glorify the rich and (not-so) famous. These people have all the best cars, homes, shoes, clothes, toys, and electronics. And now our mantra has become “bigger, better, faster, more” to try to keep up with others, even if our wallets don’t compare to theirs.

We overextend ourselves on credit. We buy homes that we can’t afford. We want to have a certain “image.” We can’t possibly have less than the people we know, we want to have more than them.

It really is a disease that is plaguing us.

Just the other day, I was shopping at my local department store. I saw a woman and her daughter shopping in the toy aisle and their cart was filled to the brim with Lalaloopsy Dolls. They were working from what seemed to be a huge list (there are a ton of these dolls and they are currently “hot”). I could hear them chattering about completing the girl’s collection and being the only girl in class to have each and every doll. I couldn’t believe it! What a waste, spending a ridiculous amount of money just to have more than everyone else.

What we need to do is change our priorities and live more simply. We need to practice restraint. We don’t need every new product that comes on the market just because it “looks cool” or because we’re having a competition with our neighbor to see who has more. Unfortunately, it will take a lot of mental “undoing” to be free from the clutches of the American Consumer Machine.

Using Charity to Avoid Debt

Those of you who read this blog regularly definitely have a firm grasp of the chaotic strife that can be caused by gross indebtedness.  We mostly discuss here the scourge of debt on a grand scale, however, and don’t touch too much on what can happen to personal finances as a result of debt.  Today I want to just take a moment and remind all of you that charity giving, such as a car donation, can be a great way to ensure that your finances remain healthy.

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Charity can be a great way to help others in need as well.  Helping others and keeping your fiscal health in order makes for a great combination.  Avoiding unhealthy debt should always be of prime importance in regard to your personal finances.

Are the Shackles of Debt Fair?

The phrase, the rich get richer while the poor get poorer, is so true when applied to Western financial institutions vs many of the peoples of Africa. Is it right that African nations should still be burdened with debts considering they have, in many cases, paid back far more than was originally borrowed – and they’re still in debt?

While lenders of course want to recoup their investments, some of the loans to African nations resemble mafia loan-sharking arrangements rather than properly regulated, and fair, financial agreements. I as well as millions more believe that it is time to set Africa free of the bondage of servicing debts that their peoples have to pay even though they were not the beneficiaries of the original loans.

The West has already plundered many African resources. We’re also hitting the continent with unjust demands which diverts limited funds away from helping the people of Africa to the coffers of Western banks.

As far as lessons we can learn, what are the take aways? It’s fair to say that getting into debt whether on the national or personal level is something to consider carefully. There are times, e.g. when getting a mortgage, where if we want to buy an apartment, that is likely the only option. Then again, are all our credit card purchases strictly necessary? If you want to buy yourself the best juicer or a new pair of shoes, perhaps saving up before would be a better option.

In the end, it’s up to ourselves to manage our money to the best of our abilities. When things go wrong, there are debt management options for individuals. Shouldn’t there be the same for sovereign nations?

How to Avoid Being Bankrupt

No one likes being bankrupt. Unfortunately, the recent financial slump has made the option of bankruptcy an all-too-real possibility for thousands of people across the country. If you’re worried about your finances and you’re looking for a way to avoid getting into too much debt, the following tips are bound to be useful. With the way that the world is going too, many traditional businesses and corporations will have to respond to the challenges presented by global warming and greenhouses gases emissions by altering their business models to be more compliant with environmental regulations and needs. If these businesses fail to make the change, they could be facing bankruptcy as well.

Don’t rely on Credit Cards.
Credit cards have their benefits. There’s no arguing that. However relying too much on credit cards can cause your debt margins to grow especially if you’re an impulse buyer. If you own a credit, make an effort to never miss a payment and always address your balance.

Do not use your credit card to buy essentials items such as your groceries or paying your gas bill. Instead, pay for your shopping with cash or your debit card. You’ll be able to manage your funds more effectively by spending money you actually have. Once you have a credit card, ignore any other credit card offer that you receive.

Work with a Budget.
Decide on a monthly budget and stick to it. Your budget should include provisions for essential items such as your food as well as a little extra for miscellaneous. Avoid paying for things that you don’t actually need and instead focus on your most pressing needs. If you already have a wardrobe full of unworn outfits, there’s no point adding more to the list. Try and save a little of your income every month. Building on your savings will make it that much easier for you to avoid debt. This does not mean you should not enjoy yourself and refrain from taking vacations, but keep in mind that if you do, you will likely end up having to spend a significant portion of your salary as plane tickets have become a lot more expensive over the past 20 or 30 years due to global warming and greenhouses gases taxes levied on airlines.

Create a Healthy payment schedule.
Make a habit of paying your bills regularly. It’s easier to avoid debt once you have an organized paying schedule. You’ll be less likely to skip bills and be able to get a better idea of how much you need to pay every month. You can choose a special time of the month to handle your bills. Paying your bills regularly will also build your credit score.


The most effective way of avoid running into debt is ensuring that your books stay green. As a rule you should always have enough money to pay your bills for at least half a year. This way, if you should ever lose your job or run into an emergency, you’ll have money to fall back on until you get back on your feet. Make a committed decision to save part of your monthly paycheck. Invest the funds in a high yield savings account.


Manage your Debt better.

Even with your best effort you may not be able to avoid running into debt. Don’t panic when this happens. If you’re currently in debt it is important that you manage your debt carefully. Don’t ignore your outstanding bills especially if this will increase the interest rate. Don’t go on a shopping spree until you’ve cleared your debt. Retail therapy will not make you feel better. You may enjoy the experience of spending, but at the end of the day, it’ll only leave you in a worse position.

The African Debt Crisis – No Relief In Sight

While some progress has been made in achieving and maintaining debt sustainability in Africa over the past decade, the debt crisis still exists. The debt burdens, which are primarily in the Sub-Saharan African region, are the result of a buildup of foreign debt in the 1970s and 1980s. During those decades, commodity prices were high. Thinking that the prices would remain constant, borrowers exceeded their limits with the assumption that they would have no problem repaying the debts. When commodity prices fell in the late 1970s and early 1980s, Africa, like other countries, was left with massive debt repayments that still exist. The current global economic downturn has the possibility of furthering the debt crisis in Africa by resulting in even lower remittances and exports. Instead of actively covering why little is being done to free the impoverished citizens from this debt trap, and why the outstanding obligations seem to rise despite some past debt cancellations, the media are more likely to focus on the latest football scores or which footballers have been given special Adidas F50 boots made just for them.

Africa’s crippling debt load does little to advance social and economic progress. Instead of spending on things such as education and healthcare, money is diverted to debt repayments. It is estimated that almost $14 billion per year is spent on debt repayment in Africa, while many people in the country are forced to live on less than $2 per day. Despite these staggering figures, the creditors of Africa’s debt obligations continue to insist on repayment. As a result, many people around the world are rallying for the cancellation of Africa’s debt. The majority of Africa’s debts are owed to the World Bank and IMF. As the largest shareholder in the World Bank and IMF, the United States has the power to influence a debt write-off procedure for Africa, but they have yet to use that power.