A short 'general awareness of economics' questionaire ----------------------------------------------------- What do you understand by the following terms? Fiat currency Gold-backed currency Bearer certificate Fractional reserve banking Yen carry trade Derivatives market Credit Default Swap (CDS) Collateralised Debt Obligation (CDO) Residential Mortgage Backed Securities (RMBS, the Australian version of CDOs) Adjustable Rate Mortgage (ARM) Usury SWIFT Put option Credit squeeze 'Upside down' (in the property investment sense) Hyperinflation Currency collapse CEDE & Co MERS How much money is a Trillion Dollars, in real world terms? The estimated value of all Derivatives and CDSs in existence is how many Trillions? The estimated total amount of currency in the world is how many Trillions? The estimated total amount of bullion in the world is how many ounces? See any interesting realtionships there? ----Questions----- What is money? What kind of currency is used in the USA, UK, Australia, etc? Who 'creates' money, in the general, historic sense. Who creates money these days, and since when? What is the US Federal Reserve Bank, and what is its legal status? (Hint: it's not Federal, not a reserve, and not a bank.) What was the final result with every single instance of fiat currency, in the past? What aspect of human nature absolutely guarantees that will always happen? What is the relationship between interest rates and factors such as a nation's Balance of Trade, and interest rates in other countries? What is the 'M3' statistic, and who publishes it? (trick Q) Explain why the above is a trick Q. Why do you think they chose to do that? What is the principle cause of inflation? Explain how inflation is an indirect tax, of whom, benefiting whom. Roughly speaking, in purchasing power, how much is a dollar today worth, relative to a dollar around the year 1900? Why is that so? What is the difference between Investment and Speculation? Markets such as the stock, bond, real estate, etc can be treated by investors as investments or speculative. What is the difference in investment strategies that distinguishes the two? What is a 'market bubble', and where do 'tulip bulbs' and CDOs fit in that? Do bubbles result from investment, or speculation? How can you tell if a particular asset market is experiencing a bubble? What happens to all bubbles, in the end? What are the indicative signs that a bubble's time is nearly up? What is the relationship between government bonds, and credit availability? What portion of a typical western nation's total money supply consists of physical cash (coins and paper money)? If all bank loans were repaid, how much money would still be in circulation? The same as above, but if repaying all bank loans PLUS INTEREST DUE. Is Real Estate _always_ (over say the last 200 years) a gainful investment? Identify the relevent periods, and explain their underlying causes. Observe the 'History_of_home_values.jpg' graph, and comment on present conditions. What caused them? Predict what will happen next? How soon do you think that might happen? Heard anything on the news lately that might be relevent? Is 'economy and economics reporting' on the main stream media intended to truly inform, or intended to manipulate consumer/investor/voting behaviour? What is the difference between credit availability, and credit cost? Roughly what proportion of government spending is funded by taxes in general? By Income Tax? Could governments do without Income Tax? Did they ever? Considering that, why do you think governments impose an Income Tax? How does government deficit spending relate to credit availability? When credit is cheap and available, what tends to happen to markets such as Stocks, Bonds, and Real Estate? Is the result investment, or speculation? Given that relationship, explain what happens when credit cost increases, and/or availability declines, during a speculative investment bubble. How are ARMs involved? How is the accepted 'spot' dollar value of gold determined? What form of 'gold' is traded by the above venue? Why is the actual trading price of physical gold diverging from the spot price? Look up the Australian Banking Act (as amended) and search for 'Gold'. Why did they do that? What was the root cause of the Great Depression? What is the root cause of today's 'ongoing events'? In what ways is this time different to the Great Depression? Name three historic examples of hyperinflation. What form of money is Constitutionally authorised in the USA and who is supposed to create it? What do these phrases mean? - "Demonetize the currency" - "Government debt default" - "Federal reserve note" - "Treasury note" (add 'Kennedy' to that search for some interesting history.) - The Swamp Creature, aka US Federal Govt Inc. - Depositor bail-ins.