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192 definitions by abu yahya

(FINANCE) a financial instrument whose value is tied to something else; for example,

* a futures contract (future)

* an option

* a swap

In each of these examples, the value of the derivative is related in some way to the price of something else. When the market price of (say) an ounce of gold goes from $1000/oz to $1050/oz, the return to the owner of 1 oz. of actual gold is 5%. But for the owner of a call option or a future, the return is much, much greater than that.

A derivative can be used to multiply risk AND potential profits to speculators; but it can be used for the counterparty to minimize risk by locking in prices, or by hedging against risk.
The economic crisis of 2008 has really focused attention on the financial derivative market.
by Abu Yahya April 05, 2010
the gap between revenues and expenditures for a government (over a given period of time); often referred to as an internal deficit or public deficit.
The public deficit accumulates over each time period (usually a year) into what is known as the public debt.

According to Keynesian and Neo-Keynesian economic theory, fiscal deficits are usually the most effective tool for stimulating economic activity; the actual choice of how the money is spent is less important.
In the USA, most states are not allowed to run fiscal deficits. In other federal republics, such as India and Argentina, they are allowed and frequently account for much of those countries' internal deficits.
by Abu Yahya February 14, 2009
(1) The strategy by the world's economic elites of imposing an extremely neoliberal economic regime on communities they control, using some form of shock: a natural disaster, a coup d'etat, a war, a financial crisis, etc. Once the community has been crippled by this first shock, the economic "reforms" are imposed suddenly, creating a secondary blow. Then, as the community begins to recover and fight back, the authorities use torture and police brutality to (literally) shock the community a third time.

(2) title of a book by Naomi Klein describing def. 1

(Please see disaster capitalism.)
Ms. Klein's 2007 book described the rise of disaster capitalism in mostly poor countries: Chile (after 1973), Argentina (after 1989), Poland (after 1993), and Sri Lanka (after 2004). But in 2009, the super rich were able to inflict the shock doctrine on the richest countries of the world, including Germany, France, and Italy.

The 2008 financial crisis was entirely a product of the richest 1% of the human race; but soon after, national governments scrambled to punish the remaining 99% for the crisis instead, by slashing public services and imposing austerity programs.
by Abu Yahya July 10, 2010
(FINANCE) a person or entity that lends money to someone else by creating securities and selling them. In commercial milieux, this is investment banking, and the most famous investment bank is Goldman Sachs. Another major investment bank is Morgan Stanley.

Most major countries have a ministry of the treasury, or ministry of finance, that issues bonds for the government and is responsible for selling them to raise money for government borrowing. These are treasury securities.
Peter Warburg was an underwriter who helped "design" the Usonian federal reserve system.
by Abu Yahya May 05, 2010
(FINANCE) a situation in which an investor owns financial instruments (shares, bonds, financial derivatives, etc.) that will make the most money IF some other thing declines in value.

Therefore, one always has to take a short position on something in particular. A short position on gold means the investor expects gold to decline in value in the near future, and has bought various things to make money if it does.

Some ways to take a short position on X include:

(1) buying a put option on X

(2) writing a call option on X

(3) borrowing X and selling it (shorting a stock)

#3 is the classical way to take a short position. It was dangerous because a skillful trader could squeeze the shorts using a corner.
BILL: I guess you took a bath when the stock market tanked, huh?

ANA: Nope. I took a short position on all of the nine largest banks. Did rather well, thank you very much.

BIL: Sweet!
by Abu Yahya April 05, 2010
The AEI is extremely well-connected, and much favored by business interests.
by Abu Yahya May 29, 2009
*noun*; in Keynesian economics, the rate at which aggregate consumption rises in response to a rise in national income.

For example, suppose the marginal propensity to consume (MPC) is 0.95. If the national income is 100 billion dollars, and it rises 10%, then consumption will rise by 9.5 billion, and saving will rise by 0.5 billion.

If this theory is correct, then an expanding economy will suffer insufficient demand for its own output, and a recession will be inevitable.

This is why national governments respond to recessions with deficit spending: they are trying to counteract the MPC's effect on aggregate demand, and bring it in line with potential output.
Not only is the marginal propensity to consume weaker in a wealthy community, but, owing to its accumulation of capital being already larger, the opportunities for further investment are less attractive...

J.M. Keynes, *The General Theory of Employment, Interest, and Money* (1936), Ch.3
by Abu Yahya March 03, 2009