You are currently browsing the category archive for the ‘in plain english’ category.


Photo by: nromagna

I know I wasn’t the only person who read about or watched the news of Wall Street’s chaos and felt completely confused about what happened, how it happened and why it mattered to me. To be honest, I’m still getting a grasp on it. But as I hoped it would, my favourite podcast This American Life has tried to explain it in its latest episode, “Another Frightening Show About The Economy.”

In this podcast, journalists Alex Blumberg and Adam Davidson detail the financial crisis in plan English. They start with the day the market died, specifically examining the fall of the commercial paper market, which is explained as “an industrial sized I.O.U.” They also discuss credit default swaps and examine whether the $700 billion bailout bill signed last week was a good or bad deal for the average American.

This isn’t something you’ll want to listen to while grocery shopping. It deserves your attention if you’re interested in how this affects you, which it will–even if you’re a Canadian watching the situation from north of the border.

You may also be interested in listening to Alex and Adam’s older episode “The Giant Pool of Money” which examines the American housing crisis, one of the reasons Wall St. is in this mess to begin with. Download the latest podcast for free now and stream (or pay $1 to download) the archived episodes of TAL.

If you have other resources for simpletons like me, please share them in the comments.

Advertisements


Photo by: Derek Farr

If you’ve picked up a newspaper, turned on the radio or television, you’ve heard the R word: recession. But what does it mean and how does it affect the average person? Pete returns with what I hope is a bi-weekly blog entry. Today, it’s all about recession.

What is a recession?

A recession is when the gross domestic product of a country or region shrinks for two consecutive quarters. Since the idea of this is to put fancy economic terms into words normal people can understand, let me try that again…

The Gross Domestic Product (or GDP) of a country is the total value of all the goods and services produced within the country. If you add up the economic value of every single manufactured item and service sold (a ridiculously huge concept to think about) you get the country’s GDP. Canada’s GDP in 2006, for example, was $1.178 trillion — that’s the total value of every Tim Hortons coffee, dollar-store umbrella, sky-diving lesson and grocery bill sold during the whole year. In simple terms, if that number gets bigger, the economy is expanding. If that number gets smaller, the economy is contracting.

In finance, years are divided into quarters — periods of three months. So by a literal definition, a country is in recession when its economy shrinks for six consecutive months. Strictly speaking, that hasn’t happened yet in Canada or the U.S.A. But my hunch is we’re pretty damn close.
Read the rest of this entry »


Photo By: Mike9Alive

“Interest rate” is one of those terms I think I understand, but I don’t fully ‘get’ how it works. Pete is back today with some great answers to my questions about interest rates. He explains what an interest rate is, where we find them, how they’re determined and why credit cards have different rates.

Very briefly, please explain what an interest rate is.

An interest rate is the rate at which borrowed money has to be repaid. It is typically expressed as a percentage. A rate of 1% implies that if you borrow $100, you have to eventually pay $101 back the person or institution you borrowed the money from.

Read the rest of this entry »


Photo By: Miyukiutada

I have a very basic understanding of financial terms. When I read the business section of a newspaper, most of it makes no sense to me. It’s really difficult to be smart with money if you don’t even understand the terms of a simple contract with a bank. With that in mind, I’ve been asking my good friend Pete (of Growth In Value) to explain basic financial terms to me. Today, we’re starting at the beginning. We’re talking about net worth: what it it and why does it matter?

Read the rest of this entry »