Many people are resorting to investments because they started to realize that living paycheck to paycheck just won’t cut it anymore. The problem with deciding to take that step is the fact that you’re going to need some money in the beginning, which isn’t always easy. Your best choice is usually trying to get a loan, but a few complications come with that option. Whether you’re trying to get a loan to start a business or to pay off your mortgage, bad credit history will always stand in your way. The question is, can you still get a loan in that case?
Can you get a loan with a bad credit history?
It’s possible, yes, though it’s definitely not easy. Having bad credit history doesn’t mean you’re a bad person. It’s a financial strait that many people find themselves in and it’s a tough jam to get out of. You need a loan to get out of that closed loop, and there are sources from which you can get one, even if you have bad credit history.
Friends or family
Yes, your first approach to getting a loan with your bad history is going to friends and family. It doesn’t always work, but if it does, you should definitely take advantage of this window because chances are your friends and family won’t charge you high interest rates, if they even did. You need to come up with a sound payment plan that ensures that they will get their money back in a period of time on which you’ll both agree. It’s very important that you make them trust that you’ll pay all the money back in a specific period of time, so they’d feel comfortable lending you the money you need to get out of your financial strait.
Loans
Now that the easy option is out of the way, is it possible to get a bank loan or one from a lender with your bad history? It isn’t easy, but it’s definitely possible. You’re going to have to do some things, though, to qualify for a loan. These are some tips and things you need to keep in mind because they might just get you that loan you desperately need.
1. Get acquainted with your finances
You can’t possibly hope to get a loan unless you know the ins and outs of your personal finances, down to the tiniest details. Get acquainted with your accounts, what’s in them and how the cash flow has been moving over the past few years. You can start doing that by checking your credit reports, which is a crucial first step because that’s how you start figuring out your credit score. If there are any special comments in your report, you should try reaching out to whoever put that remark to have them remove it before you apply for a loan –– because it does make a difference and comments like these will be taken into consideration by the lender.
It’s also very important that you learn your credit scores as well as your debt to income ratio, because that is how you can start figuring out a plan to improve your score history to get back on your feet successfully.
2. How you can improve your credit history
Now that you’re well acquainted with your credit history, it’s now time to start applying certain strategies to improve it. The first thing you have to pay attention to is the payment history. Yes, a lot of factors are taken into consideration in your overall score, but payment history is the most crucial and delicate one. So, you must make sure you pay the upcoming payments on time. Forget about what happened in the past, and focus on the future ones to ensure you never miss one.
Contrary to popular belief, closing old accounts is not always a good practice. Why? Because those old accounts that you’ve already paid off open can help increase your credit history length, and it could give you a lot more solid grounds to stand on when you’re applying for the new loan.
One thing you have to be careful about is your credit limit. It is always best that you keep the ratio between your debt and your credit limit reasonable. The less that ratio is, the better, naturally. This is important because it’s a very bad sign if that percentage is high, and it would show many lenders that you’re not very wise when it comes to your finances and it might sway them from giving you a loan.
Speaking of credit, you should never open new credit accounts unless you’re 100% certain you could take care of them and pay them off on time. Randomly and excessively opening credit accounts shows lenders that you’re not very responsible, or worse, it might make them think that you’re running a scam. This is why it’s very important that you keep this to a minimum, and only open new accounts in the case of emergencies, and if you’re absolutely sure you could handle them.
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3. Understand your options
After doing your best to improve your credit score, you next want to start looking for a suitable lender that can give you what you’re looking for. But there’s one more thing you need to do before taking that step, and that is understanding your options when it comes to loans. The two most common types are unsecured and secured loans.
Unsecured loans might be a bit problematic if you have a bad history, because they basically charge you a higher interest rate because of your situation –– and that is if you managed to obtain the loan in the first place. An unsecured loan is basically one that you don’t need collateral for. You can use them to cover emergencies or take care of another debt you found yourself in.
Secured loans, on the other hand, are protected by a collateral like home equity or any other assets. The good thing about this is the fact that they come with lower interest rates, but you do need to have a collateral to get a secured loan in the first place.
4. Find a co-signer
This is one of the best strategies that could help you land a loan. A co-signer is someone with a healthy credit score who would sign the loan with you, which will make your chances of getting it exponentially better, not to mention the fact that it’ll also probably land you a lower interest rate as well. Your chances are always better with a co-signer, and if you have someone willing to help you with that you should definitely get them to do it because it’ll make a lot of difference.
5. Find the right lender
Now that everything’s in order, you need to start looking for the right lender. This step will require a lot of research on your end, and it’s important that you be diligent with it because it makes all the difference in how this entire process will pan out. Don’t just go for the first loan that approves you; wait until you look at other options so you could have a clear picture.
You want to find a lender that would give you the personal loan you need for the lowest interest rate possible, and the best loan term. Each will have their own policies and evaluation process to determine just how much risk comes to lending you money, because loans for those with bad credit are associated with a risk factor for most lenders and they don’t hand them out like that. You need to keep all those points in mind because you might need the money urgently, for instance. So, do your homework and research the hell out of every possible lender you can find online, and you are going to find plenty.
Other options
There are other options that you can resort to if you want to get a loan with your bad history, but they might come with higher interest rates in some cases. For instance, in title loans, lenders rarely care about your bad credit, and you could easily use your vehicle as collateral to get some money, but it’s a short term loan and the interest rates are usually a bit higher. So, keep that in mind if you’re considering getting a title loan. Another good option for is credit unions, which particularly specialize in offering loans to people who have a bad credit history, and you can easily find local options to help you get out of your jam. The great thing about credit unions is the fact that they have an interest ceiling which applies to everyone –– 18%. That is a great percentage and it’s around half of what a bank would offer you for a similar loan with your bad history.
There are other options that you can resort to if you want to get a loan with your bad history, but they might come with higher interest rates in some cases.
What the cons of loans with bad credit are
1. Higher interest rate
You can get a loan even with your bad history, but you’re going to have to pay higher interest rates than usual because of your special situation. Banks and lenders usually take advantage of your need for money –– and to be honest, they’re trying to be on the safe side, considering your bad history and the fact that you’re at risk –– so they impose higher interest rates, which means you’ll pay a lot of money in the long run. You need to keep that in mind before applying for a loan with bad history so you don’t get surprised when it does get approved.
2. They take time
Some of these loans with bad history could take quite some time to get processed, a bit longer than your average loan. Sometimes it’s because they’re double checking your history and thoroughly going through your finances or any other details, but it might not be the best option for you in case of emergencies.
3. Penalties
You have to make sure you’ve read every detail of your agreement with the lender, because sometimes there are extra fees or penalties that you might be subject to without even knowing it. Ask if there is a loan origination fee or any other hidden fees, and whether or not they have penalties for being late and just how much those penalties are. There are even some lenders that impose a penalty if your payments are made by check! So, it’s important to carefully check those details because the last thing you want in your situation is to pay any extra money that you can’t afford to spare.
4. The risk involved
You might get asked to include a collateral in the agreement like your car or house, which is a bit risky because if you failed to pay your installments, you might lose the car or the house.
5. Plenty of shady lenders
You might come across quite a few shady lenders here and there, which is something you need to be really careful about. Some are not licensed and don’t have approval to offer that kind of service, so make sure that you’re dealing with a licensed lender in your state before you pay any money so you don’t end up being scammed.
6. The temptation of short-term loans
Most short-term loans with your bad history can be too much to resist sometimes. Title loans, paydays, and all the likes might seem very tempting, but they come with a lot of baggage. Their interest rates are higher and they cost you more money in the long run, so that’s definitely something you should keep in mind.
As shown in this article, it is possible to get a loan with bad history. Is it perfect? Definitely not, but neither is your situation. You’ll have to compromise either way to get out of the mess you’re in, but remember to be patient and wait until you get several other offers so you could compare between them and choose the most suitable one for you.
But as the digital payments ecosystem continues to expand, it is becoming increasingly apparent that ‘payment tokenization’ solutions, such as network tokenization, can address the urgent need for increased security and reduced complexity, while promoting enhanced consumer experiences. Here Andre Stoorvogel, Director of Product Marketing at Rambus Payments, explains for Finance Monthly.
A short history of tokenization in the payments industry
Tokenization solutions can be broadly divided into two categories: security tokenization and payment tokenization.
Security tokenization (also known as acquirer tokenization or non-payment tokenization) approaches have traditionally been used to protect cardholder data and personally identifiable information (PII) stored in merchant databases. This is needed to enable popular consumer payment methods such as recurring billing and one-click ordering.
In comparison, PCI tokens are security tokens that comply with PCI guidelines to meet PCI DSS standards.
The publication of EMVCo’s EMV Payment Tokenization Specification – Technical Framework in 2014 marked the introduction of ‘payment tokenization’ to the ecosystem, and was followed by an update in 2017. The aim? To enhance the underlying security of digital payments by replacing primary account numbers (PANs) with unique EMV payment tokens. Network tokenization is a type of payment tokenization where the payment network plays the role of the token service provider (TSP) to generate tokens.
Although EMV payment tokenization found immediate success in securing in-store mobile contactless payments, Consult Hyperion predicts that it is online payments that will deliver ‘the real volume’. The question is, what differentiates network tokenization from security tokenization?
Delivering end-to-end security
Proprietary security tokens are designed to protect sensitive information when it is ‘at rest’ within a merchant’s database after a transaction has been completed, reducing the risk and impact of a data breach.
The problem is, sensitive data is vulnerable throughout the entire payment processing chain. Not just at rest.
Neither proprietary or PCI tokens protect the consumer data while in transit or in use, introducing opportunities for fraudsters to hijack data through phishing attacks, malware and more. The rapid growth in card-not-present (CNP) fraud, despite ever-increasing investment in fraud protection, demonstrates a more fundamental, holistic approach to payment security is needed.
Below are three ways in which network tokenization can help meet those needs:
1. Securing data in transit
The main benefit of network tokenization is that card details are protected throughout the entire transaction lifecycle.
2. Domain controls
Network tokens can be restricted in their usage, for example, to a specific device, merchant, transaction type or channel. With the proliferation of new payment methods, such as online, IoT and voice, the ability to limit and control how network tokens can be used is key to preventing cross-channel fraud.
3. Reducing false declines
Since network tokenization protects card details throughout the entire transition lifecycle, issuers treat network tokenized payments as inherently more secure than non-network tokens. This can deliver numerous benefits downstream and address key pain points for merchants, by limiting fraud prevention spend, increasing approval rates and reducing false declines.
This trio of benefits are not the beginning, middle and end, however… there’s more.
4. Bridging the interoperability gap
As well as escalating security challenges, merchants must also deal with spiralling complexity.
Security tokens are limited to specific relationships, such as between a single acquirer and merchant. As the digital payments ecosystem expands, the burden of managing different proprietary tokens from multiple acquirers, payment service providers (PSPs) and gateways will become increasingly challenging.
The good news is that network tokens are globally interoperable across multiple acquirers and gateways. With the growth of omnichannel retail, consistency across different acceptance environments is a significant value-add.
We must also consider the backend impact. Security tokens are not formatted as routable PANs, so cannot be accepted as a like-for-like ‘replacement’. Network tokens are in the same format as a regular PAN, so can be accepted and routed along the normal payment rails without impacting the existing merchant systems.
5. Enabling value-added services
Hampered innovation is one of the hidden costs of fraud. Merchants want to spend their time, effort and resource on better consumer experiences, not tackling fraud.
It is true that security tokens can be effective in specific scenarios. Network tokenization offers more than just security, however, and can also be utilized to enhance the buying experience.
Digital card art to increase brand recognition, the ability to instantly refresh card details, push provisioning to enable consumers to keep track of where and when their payment credentials are being used. All these features complement the security proposition to increase convenience and reduce friction.
Network tokenization versus security tokenization?
Although often referenced interchangeably, it is apparent that security tokenization and payment tokenization solutions (such as network tokenization) are very different propositions. Both are effective solutions for their defined purposes, but we should look to network tokenization as a foundational technology enabling secure, simple digital commerce through end-to-end security, global interoperability across different acceptance environments and value-added services.
Here's the story of how the country's largest bank got to where it is today.
Biographer of J.P. Morgan Jean Strouse, longtime bank analyst Mike Mayo and CNBC banking reporter Hugh Son help tell the story. You’ll learn about how Aaron Burr and Alexander Hamilton are part of the bank’s history, along with the first ATM, and the company’s position moving forward into the future of digital banking.
Besides, sometimes you have to take a step backward to move forward. The most practical way of dealing with bankruptcy and moving back to solvency is by establishing a saving plan. Saving is an essential aspect of wealth creation. With the right mindset and correct information, individuals can create wealth post-bankruptcy by adopting and neglecting certain behaviors.
Take Advantage of the Pre-discharge Credit Counseling
Bankruptcy comes with a lot of emotional and psychological strain. However, getting help from credit counselors can help you get through. Involving your legal advisor will help you find an approved agency to counsel you through the process. The counseling platform offers valuable financial advice to help you wisely manage your finances in future. It also focuses on income, expenses and strategies to save. Consequently, it covers financial literacy on budgeting and debt management. Budgeting your finances is essential if you want to achieve your saving goals. During bankruptcy, individuals learn to live without credit. Therefore, this experience should be used to your advantage by trying to operate with no debt post-bankruptcy. In case you access credit-cards, it is essential that payments be made before or on dates when they are due.
Increase Your Income Streams
After being declared bankrupt, sourcing for new income streams may be difficult at first. However, individuals can work with what they have, to achieve what they hope to get. For example, monthly income paid to unsecured creditors before being declared bankrupt can help you build up on your savings by depositing it into your savings account. Individuals can also start a business. Not all business ventures require capital to start. For example, Dave Ramsey began a financial advice group in his church after he was declared bankrupt which later became the successful Ramsey Show. Using your experience to educate others can create business opportunities for you, and you can even document your experience by writing a book. You can also take up a second job and save income from that job.
Work on Improving Your Credit History
Although debt is the last thing, you should think about post-bankruptcy, working on developing a good credit history is essential. Bankruptcy records show on your credit score for up to seven years. However, improving your credit scores in three years could make you qualified for a loan. Lenders often look at payment history, hence having years of consistent payments to your savings account shows reliability and commitment. Consequently, a good credit history improves your credit score allowing you to qualify for loans with lower interest rates which also makes it easier for you to save.
Dealing with bankruptcy can be exhausting. However, accepting and working towards financial stability can make it bearable. Personal financial evaluation can help you know where to start on your journey towards normalcy. Adopting better financial habits like living within your means is also good to ensure you remain financially stable.
Martin Kisby, Head of Compliance at Equiniti Credit Services, explores the motivations behind the evolution of compliance functions in consumer credit firms.
Risk and compliance departments, once held in low esteem by other business units, have evolved into a crucial function for protecting profitability. This is still a controversial statement in the consumer credit industry, but it’s easily justifiable. To do so, let’s take a look back.
It’s 2008. The consumer credit market is regulated by the Office of Fair Trading (OFT). Firms have a set of guidelines they are required to adhere to, but in reality can interpret or even circumvent them entirely. Business objectives are often, if not always, placed ahead of consumer needs.
So what was the role of the compliance function back then? Well, it provided some assurance to the OFT that firms were not ignoring its guidelines in their pursuit of profits.
This often led to compliance functions being derided as the ‘Business Prevention Unit’ or ‘Profit Police’ and being allocated minimal resource.
Fast forward to 2014: the financial crash has altered the consumer credit landscape dramatically. Trends in mis-selling, together with poor consumer outcomes, have highlighted the need for fundamental change. The creation of the Financial Conduct Authority (FCA), by merging the OFT and Financial Services Association (FSA), is intended to add more stability and oversight to the sector, ensuring better service delivery for consumers.
Big changes ensued.
The FCA developed a more robust and detailed handbook, which not only provided guidance on how firms across the sector should be operating, but also changed what was previously ‘advice’ into hard and fast rules.
Firms were given only interim permissions and needed to complete an approval process to gain full FCA authorisation. This required firms to demonstrate strict adherence to the new and updated rules and guidelines.
From this point onwards, the role of compliance was transformed. Firms began to allocate significant resource to this function to ensure they could provide continued assurance to the FCA that its rules and guidelines were being followed. It became imperative to demonstrate that mis-selling, unreasonable collections practices, affordability issues and poor customer service were being eliminated.
The compliance department evolved from the ‘Profit Police’ into a pivotal function in every FCA regulated firm.
Risk management also became more prevalent under the new regulatory body, as the System and Controls section of the FCA’s handbook requires firms to assess and manage their risks, and have a Chief Risk Officer as one of their Approved Persons – individuals the FCA has approved to undertake one or more controlled functions.
These complimentary objectives meant that compliance and risk departments were consolidated. Compliance plans were established to monitor specific elements of the FCA handbook and verify adherence to them. Any identified control inadequacies could be migrated onto a firm’s risk register for monitoring and remediation.
Back to the present. Four years on from the introduction of the FCA, firms have, overall, implemented the necessary oversight to demonstrate that they are meeting their regulatory requirements and treating customers fairly.
But let’s be honest – there are selfish motivations too. A strong compliance department, empowered to change processes as best practice dictates, reduces the risk of both regulatory fines and exposure to defaults. This increases revenue and protects profit margins.
In a sector competing on cost at a scale never seen before, and where consumer brand loyalty is decreasing by the day, protecting a firm’s margins is crucial.
As compliance has increased in importance, technology has kept pace and evolved to reduce the time and cost burden regulation could otherwise have imposed. Now, best-of-breed credit management solutions seamlessly integrate compliance monitoring and reporting into their sourcing, approval and collections processes.
Happily, this combination of motivations and technological developments has created a win-win for lenders and borrowers alike: an established and proactive risk and compliance function that not only protects consumers but also contributes to the strategic objectives of the lender’s business.
Over its 10-year life Bitcoin has been the standard bearer of the new financial revolution. As the baby of the 2008 global financial crash, Bitcoin was launched as a direct challenge to banks and other financial intermediaries – a middle-finger to fiat currency markets. Below Kerim Derhalli from Invstr, provides expert detail on the rise and impact of the prized digital currency.
Enormously popular with those who grew up during that very crash, Bitcoin became an outlet for their anger and rejection of the traditional currency systems. These were people who felt excluded from the club of the global financial elite, an elite who had driven asset prices – stocks, bonds and property – far out of the reach of the ordinary saver. At last here was an asset that they could claim for their own. The early returns were spectacular. A new class of financial investor was born. A digital divide was created.
Bitcoin’s impact has been as much a cultural one as it has been a financial one. The Bitcoin revolution has been defined by self-empowerment and self-direction. Such is the extent of its impact on Internet culture, that there are now entire lexicons dedicated to Bitcoin investing – from ‘HODLing’ (hold on for dear life) and ‘SODLing’ (sell off for dear life) to Bitcoin ‘mining’.
Like many revolutions, Bitcoin’s emergence has resembled a rollercoaster ride. Since its first transaction on 12th January 2009, it has enjoyed enormous growth and now sits at a current value of nearly £5000. With this growth however has come seismic price crashes. Back in November 2013, a single day saw 50% of Bitcoin’s value wiped out – the biggest single-day crash experienced by the cryptocurrency. Similarly catastrophic crashes and corrections have become near-commonplace on the Bitcoin market. Across only three days of trading in April 2013 Bitcoin’s value dropped a staggering 83%.
Bitcoin’s revelatory impact on both the global fiat currency system and internet culture might never have come to be were it not for the very technology which underpins it. In following the bumpy ride of bitcoin over the past ten years, we’ve also come to learn more about its elusive public ledger - blockchain.
The blockchain may have risen to notoriety on Bitcoin’s coattails, but now we find that the financial and tech sectors are waking up to it more generally. We’re seeing more banks, and industries, recognise its potential as a payments system and we’ve even see the world’s first blockchain-drive smartphone from HTC.
Some people have compared blockchain to the infancy of the Internet in 1996. The major difference however being that in 1996 anyone with a browser had access to an infinite source of information. The Internet’s potential as an encyclopaedic resource gave it a driving purpose. Today that mass use case for blockchain is still missing.
This isn’t the only hurdle which blockchain needs to overcome to forge an identity of its own. To truly divorce itself from the price volatility of Bitcoin and the speculative nature of crypto trading we need to see that it can resolve scalability issues as well as help us to overcome security issues more broadly.
For all is pitfalls though, Bitcoin, and by association blockchain, still represent the next phase of the digital revolution. As people continue to reject the traditional top-down approach to information dissemination and finance, Bitcoin, other cryptocurrencies and their associated technologies will take human civilisation towards a more self-empowered future.
Below Finance Monthly hears from David Jones, Chief Market Strategist at Capital.com, on why Bitcoin's infamous reputation for extreme volatility may be coming to an end.
With the benefit of hindsight, there can be no doubt that the moves seen in Bitcoin, and other crypto-currencies, from the summer of 2017 through to February 2018 has all the hallmarks of a classic bubble - and corresponding bust. No doubt it will become a popular part of market history - just like the technology shares boom and bust of the late 1990s. Somewhat ironically, weekly volatility in Bitcoin recently hit a one year low below 3% - at pretty much the same time as the NASDAQ, that barometer of technology stocks, moved out to fresh all-time highs.
So why has volatility evaporated? There are a few reasons we could point to, but first let's set the scene. From the middle of November to the middle of December the price of Bitcoin increased threefold. After spending years just being something of a niche IT interest, Bitcoin went mainstream and dragged plenty of other crypto-currencies along for the rise. The mainstream media picked up on the story with almost daily coverage on TV programmes and in newspapers that would never have even heard of crypto-currencies just a few months before. The gains in cryptos seemed to represent easy money and individuals, who would never dream of speculating in more traditional markets, were keen to find out how to get involved. Facebook and Google were full of adverts on how to profit. The prices moved ever higher.
It's a classic rule of market psychology - whenever the general public gets involved in a market in large numbers, expecting further rises, then a top could well be near. This of course proved to be the case - at the time of writing Bitcoin is around 60% below its December all-time high.
Why the lack of volatility?
The obvious reason is that the hype has gone from this market. Plenty of latecomers to the crypto currency rally have had their fingers burnt, have taken their losses (or are still sitting on them) and have vowed never to return. Activity amongst the wider public has slowed.
There are not as many new entrants buying and selling as the price has burst - the story of it being a somewhat boring market in recent months, is not going to make people excited about the potential for "easy money". Wider media coverage has dried up, reducing awareness amongst the public.
Facebook and Google have banned crypto currency adverts - so an incredibly important section of the digital media world is not increasing awareness of this market. You can see this in internet searches - Google searches for Bitcoin for example are down by 75% for the year so far, again pointing to a significant shift in interest by the casual investor.
Arguably, the introduction of a listed futures contract for Bitcoin has also calmed the wilder market moves. The additional media coverage resulted in widespread speculation prior to the listing. The unregulated crypto exchanges experienced extremely high numbers of new signups and in some cases stopped on boarding new customers. The futures contract was launched in the first week of December last year and, less than three weeks later, Bitcoin started falling. Now, institutions and more professional investors have a regulated way of gaining exposure to Bitcoin without having to worry about online wallets and the worries over lack of security. The futures contract also gave the ability to "sell short" - so to profit from Bitcoin falling. This has no doubt gone some way to initiate a more orderly two-way market in Bitcoin - making it more like most other markets. But even the official futures market has suffered as volatility has dropped off - current volumes are best described as modest.
The lack of volatility is seen as a positive sign by those who see more adoption of blockchain technology. It's hard to claim that cryptos are a store of value when the price is moving 10% and more in a very short period of time. More price stability and less volatility certainly helps this value arguement. Significant new money continues to move into blockchain, with billion dollar VC investment funds being raised to new blockchain startups. The world’s leading financial regulators and institutions continue to engage and determine how to regulate and participate in what has become a disruptive new area of investment. Although the boom and bust is over (for now, at least), it could end up being one of the best things to happen for the future of crypto currencies.
With the ongoing spat between the United States and China, which seems to be only getting uglier, Katina Hristova explores the history of trade wars and the lessons that they teach us.
Trade wars date back to, well, the beginning or international trade. From British King William of Orange putting steep tariffs on French wine in 1689 to encourage the British to drink their own alcohol, through to the Boston Tea Party protest when the Sons of Liberty organisation protested the Tea Act of May 10 1773, which allowed the British East India company to sell tea from China in American colonies without paying any taxes – 17th and 18th century saw their fair share of trade related arguments on an international level.
Boston Tea Party/Credit:Wikimedia Commons
Trade wars were by no means rare in the late 19th century. One of the most infamous examples of a trade conflict that closely relates to Donald Trump’s sense of self-defeating protectionism is the Smoot-Hawley Tariff Act (formally United States Tariff Act of 1930) which raised the US already high tariffs and along with similar measures around the globe helped torpedo world trade and, as economists argue, exacerbated the Great Depression. As a response to US’ protectionism, nations across the globe began striking each other with an-eye-for-an-eye tariffs – countries in Europe put taxes on American goods, which, understandably, slowed trade between the US and Europe. As we all know, the Depression had an impact on virtually every country in the world – resulting in drastic declines in output, widespread unemployment and acute deflation. Even though most countries began to recover between 1932 and 1933, the world was hit by World War II shortly after that. In 1947, once the war was over, the World Trade Organisation (WTO) was established - in an attempt to regulate international trade, strengthen economic development and hopefully, avoid a second global trade war after the one from the 1930s.
Schoolchildren line up for free issue of soup and a slice of bread in the Depression/Credit:Flickr
Another more recent analogy from the past that could be applied to the current conflict between two of world’s leading economies, is the so-called ‘Chicken War’ of 1963. The duel between the US and the Common Market began when European countries, feeling endangered by US’ new methods of factory farming, imposed tariffs on US chicken imports. For American poultry farmers, the Common Market tariffs virtually meant that they will lose their rich export market in West Germany and other European regions. Their retaliation? Tariffs targeting European potato farmers, Volkswagen campers and French cognac. 55 years later, as the Financial Times reports, the ‘chicken tax’ on light trucks is still in place, predominantly paid by Asian manufacturers, and has resulted in enduring distortions.
President Trump may claim that ‘trade wars are good’ and that ‘winning them is easy’, but history seems to indicate otherwise. In fact, a closer look at previous examples of trade conflicts seems to suggest that there are very few winners in this kind of fight.
For now, all we can do is wait and see if Trump’s extreme protectionism and China’s responses to it will destroy the post-World War II trading system and result in a global trade war; hoping that it won’t.
If there's one thing that makes the process of investing decidedly complex, it's the constantly changing macroeconomic climate. This includes a number of individual aspects such as inflation and interest rates, and when combined they can have a cumulative impact on numerous assets and investment types.
Inflation is a particularly interesting macroeconomic factor, and one that tends to move independently to the value of the pound and the base interest rate.
Below Finance Monthly looks at the value of the pound against inflation during the course of the last 20 years or so, and ask how this should influence your investment choices in the near-term.
The Pound vs. Inflation – An Unbalanced Relationship
In simple terms, inflation has increased at a disproportionate rate to the pound over the course of the last two decades or more. More specifically, last years' prices were an estimated 303.3% higher than those recorded in 1980, meaning that 37 years ago £100 would have had the equivalent purchasing power of £403.34 in 2017.
Conversely, the pound itself has moved within a far narrower range during since the late 1980s and early 1990s, against a host of other major currencies. The GBP: USD has reached a peak 2.04 during this time, for example, while slumping to a low of 1.24 in January of last year. This trend is replicated across both the Australian Dollar and the Japanese Yen, while the pound has traded within an even more restricted range against the Euro since the 1990s.
From this, we can see that inflation and the cost of living has fluctuated far more noticeably than the underlying value of the pound, making it a particularly influence and volatile macroeconomic factor. This is an important point for investors to consider, as they must factor in the prevailing rate
of inflation and future forecasts to ensure that they build a viable trading portfolio.
Stocks vs. Bonds in the Current Macroeconomic Climate
To understand this further, let's compare the viability to stocks and bonds in the current, macroeconomic climate. In general terms, bonds are considered as more stable investment vehicles that are ideal for risk-averse investors, while stocks carry the burden of ownership for traders and are capable of delivering higher returns.
With inflation remaining high at around 3% in February (well beyond the Bank of England's target of 2%), however, bonds would appear to represent a better option in the current climate. This is because higher inflation can squeeze household incomes, lowering consumer confidence and spending in the process. As a result of this, both the economy and individual shares in the UK have the potential to be adversely affected in the short-term, while it's difficult to determine when inflation will return to a more manageable level.
Additionally, high inflation can also impact corporate profits through higher input cost, which can in turn lower share values and create negative sentiment within the stock market.
If this does happen, investors could well flock to defensive assets that are relatively risk-averse, particularly if inflation is expected to remain well above the BoE's 2% target throughout 2018. While further interest rate increases could reverse this trend, it's unlikely that the BoE will implement more than one hike this year if the current climate of uncertainty remains unchanged.
The Last Word
Of course, the economy and macroeconomic climate is a fluid entity, and one that could change considerably over the next few months.
Still, the spectre of high inflation is sure to be impacting on the decisions of investors and wealth management firms, as they look to diversify and optimise the returns of their clients in a challenging climate. This includes firms like W H Ireland, who are looking to build on recent growth and continue to thrive amid slower stock market activity and increasingly stained economic conditions.
So, while bonds may not be the most glamorous of asset classes, they offer genuine stability in the current marketplace.
As the container shipping industry continues to boom, companies are adopting new technologies to move cargo faster and shifting to crewless ships. But it’s not all been smooth sailing and the future will see fewer players stay above water.
Everything evolves, constantly. Each new breakthrough poses heaps of new questions to which answers are yet to be discovered. One of these breakthroughs happened with fintech. Fintech, as a word, is what linguists would call a portmanteau – a combination of two separate words. In the case of fintech, those two words would be financial and technology. However, as a system or a sector, fintech is what experts would call the future.
Quite simply, when technology put its fingers in the financial services’ pie, fintech was born. We are talking about mobile payments, transfers, fundraising, cryptocurrencies; you name it. Even though fintech liberalized the whole financial system and put the power into people’s hands, the traditional financial sector felt threatened by it, and understandably so. To share our amazement with it, here are some incredible facts on the incredible growth of fintech in the last couple of decades.
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(Source: 16Best)
One of the biggest trade crazes of 2017, Bitcoin and cryptoculture is a young profit-making hobby turned job for many. Now recognized as a serious business through the regulatory backing of governments and large corporations, it’s future is almost certainly one of continued proliferation, but what does its history look like? Below, Finance Monthly hears from trusted cryptocurrency expert, Fiona Cincotta, Senior Market Analyst at City Index, on the past 10 years of Bitcoin.
So far Bitcoin has only had a short life. However, the few years that it has been in existence have seen the currency go from almost unknown, to hitting the headlines on a daily basis.
Let’s take a look at a brief history of Bitcoin.
2008 – The Legend of Satoshi Nakamoto
Satoshi Nakamoto, or someone working under that alias, allegedly started the bitcoin concept, or so the legend goes. In 2008, Satoshi Nakamoto published a paper, which outlines the concept of the bitcoin. Most notably this paper addresses the problem of double spending, so as to avoid the currency being copied and spent twice. This was an essential foundation brick, that allowed Bitcoin to expand where other attempts at cryptocurrencies had failed.
This same year Bitcoin.org was born. The domain was registered through a site which permits its users to buy and register domain names anonymously.
If we think back to August 2008, it was just weeks before the collapse of Lehman Brothers and at a time when banks were notorious for behaving as they pleased. Bitcoin was intended as a decentralised alternative, controlled and monitored by market forces rather than banks and governments
2009 – Bitcoin becomes public
Bitcoin software is made available to the public for the first time. The first ever block is mined – it was called Genesis. Mining is the process by which new bitcoins can be created. The transactions are recorded and verified on the blockchain. The first ever Bitcoin transaction occurred between Satoshi and Hal Finney, a developer and cryptographic supporter.
By the end of 2009, the first bitcoin exchange rate is established and published. Bitcoin receives a value like a traditional currency. At this point $1 = 1309 Bitcoin
2010 – Bitcoin’s first real world transaction
As global economies continued to recover from the financial crash, the first real world Bitcoin transaction occurred, when a Florida programmer paid 10,000 bitcoins for 2 pizzas worth around $25. Later that year bitcoin was hacked, drawing attention to its principal weaknesses; security. Bitcoin had been trading at around $1, prior to the hack, which then sent the value through the floor. Further bad press this same year, which suggested it could be used to fund terrorist groups did little to increase its popularity.
2011 – Parity with the dollar
Bitcoin reaches parity with the dollar for the first time. By June of the same year each bitcoin was worth $31 each, which meant the total market cap reached $206 million. 25% of the projected total of 21 million bitcoins have now been mined. Encrypted currencies in general were starting to catch on around now and alternatives were appearing, such as Litecoin. Each virtual currency tries to improve on the original Bitcoin. Today there are around 1000 cryptocurrencies in circulation.
2013 – Security Issues; Price Crashes
June of this year saw a major theft of bitcoin take place, from a digital wallet - once again highlighting some of the cryptocurrency’s weaknesses. In the same year, another major security breech saw the value of bitcoin tumble from $17.50 to just $0.01. 2013 also saw the US Financial Crimes Enforcement Network issue the first bitcoin regulation. This would be the start of an ongoing debate as to how best regulate the virtual currency. Bitcoin’s market capitalisation had reached $1 billion.
2014 – Mt.Gox disappears along with 850,000 bitcoins
This year was characterised by growing understanding and desire to regulate bitcoin. Not surprising after the world’s largest bitcoin exchange Mt.Gox suddenly went offline and 850,000 bitcoins were never seen again. Whilst there is still no answer to what happened to those Bitcoins, valued at the time at $450 million, at today’s value those coins would be worth $4.4 billion. The same year US released the Bit License – proposed rules and guidelines for regulating virtual currencies. Microsoft begun accepting payment in Bitcoins.
2016 – Bitcoin boomed
Bitcoin saw an annual gain of 54%, outperforming all fiat currencies. This was the year that the bitcoin really started to establish itself and provided holders of the currency various ways to generate a return or indeed use the currency. It was seen as a safe haven from traditional assets in a year of Brexit, Trump winning Presidency, the continued rise of ISIS and the refugee crisis in Europe.
2017 – Legitimacy and $20,000
The value of bitcoin jumped from $997 to over $19,661 and its popularity has soared exponentially. The currency went mainstream as it became listed on two futures exchanges CBOE and CME. The listing of Bitcoin Future contracts on these exchanges has boosted the legitimacy of bitcoin and made it more widely available. Despite the futures contracts providing ability to short bitcoin, the value of the cryptocurrency hits an all time high.
Finance Monthly also recently heard from Fiona Cincotta, Senior Market Analyst at City Index, on the spread of cryptoculture and the passion for conversion among entrepreneurs globally.
