abu yahya's definitions
a current account deficit; a negative net flow of liquid assets to the citizens of a particular country. The external balance includes the trade balance, net foreign factor income, and net foreign aid *received*. Usually the main cause of an external deficit is a trade deficit.
by Abu Yahya February 14, 2009
Get the external deficitmug. (ECONOMICS) situation in which demand confidence in banks or borrowers is so low that monetary policy (i.e., lowering interest rates) has no positive impact on the economy. A characteristic of an economic depression.
When the economy contracts, or is in a recession, it is occasionally sufficient for the authorities to lower the discount rate or the federal funds rate. This lowers the cost of borrowing money, so more people do so, more stuff is bought, and the economy recovers. But in a depression, people will hoard cash (if they have any); if the interest rate is lowered, they still won't borrow, and the banks won't lend (because they want to restore their balance sheets).
When this happens, only fiscal policy has any chance of restoring economic growth.
When the economy contracts, or is in a recession, it is occasionally sufficient for the authorities to lower the discount rate or the federal funds rate. This lowers the cost of borrowing money, so more people do so, more stuff is bought, and the economy recovers. But in a depression, people will hoard cash (if they have any); if the interest rate is lowered, they still won't borrow, and the banks won't lend (because they want to restore their balance sheets).
When this happens, only fiscal policy has any chance of restoring economic growth.
In the fall of 2008, the failure of so many major banks caused a global liquidity trap. For two quarters, the world economy suffered a very severe contraction, and millions of people lost their jobs.
by Abu Yahya April 18, 2010
Get the liquidity trapmug. (IRANIAN HISTORY) (1882-1967) Democratically elected Prime Minister of Iran from 1951 to 1953. Ousted by coup d'etat organized by MI-6 and the CIA after he nationalized the assets of the Anglo Iranian Oil Company (BP, p.l.c.).
Mossadegh was involved in the 1924 Constitutional Revolution that was supposed to have ended autocracy in Iran and replaced it with a democratic republic. Instead, Reza Khan (Shah Reza) replaced the Qejars as as monarch. Later, Mossadegh rose to power because of rising anger at colonial deal between AOIC and Iran. His nationalization of AOIC triggered a balance of payments crisis for the UK, and two years later he was ousted by Operation Ajax. After he was overthrown, Shah Muhammad Reza was a dictator, and dependent on the USA to remain in power.
Mossadegh was involved in the 1924 Constitutional Revolution that was supposed to have ended autocracy in Iran and replaced it with a democratic republic. Instead, Reza Khan (Shah Reza) replaced the Qejars as as monarch. Later, Mossadegh rose to power because of rising anger at colonial deal between AOIC and Iran. His nationalization of AOIC triggered a balance of payments crisis for the UK, and two years later he was ousted by Operation Ajax. After he was overthrown, Shah Muhammad Reza was a dictator, and dependent on the USA to remain in power.
Muhammad Mossadegh was a true Iranian patriot whose overthrow in a British Petroleum-instigated coup poisoned relations between the USA and the Islamic world.
by Abu Yahya July 19, 2010
Get the Muhammad Mossadeghmug. Economic problem faced by LDCs. The problem occurs when the country tries to stimulate FDI by establishing a hard peg of its currency to that of another country (usually the US dollar). Initially, the plan may work very well, but then, as capital flows in, growth prospects deteriorate rapidly because the local currency is so strong its exports are not competitive. The country's growth slows down, and external debt soars. The government is stuck trying to defend the currency on international markets, a battle it is nearly always doomed to loose.
Term was coined by De la Torre, Levy Yeyati, and Schmukler in "Living and Dying with Hard Pegs: The Rise and Fall of Argentina’s Currency Board," *Economia*, Spring, pp. 43-107
Term was coined by De la Torre, Levy Yeyati, and Schmukler in "Living and Dying with Hard Pegs: The Rise and Fall of Argentina’s Currency Board," *Economia*, Spring, pp. 43-107
Right from the beginning of the De la Rúa administration (which assumed power in December 1999), the Argentine economy was caught in a CGD trap. The currency was overvalued, growth was faltering, and the debt was hard to service.
by abu yahya June 24, 2008
Get the CGD trapmug. Money that (a) derives its value entirely from the mandate of the government, and (b) cannot be freely traded. Fiat money is not the same thing as floating currency, because if a floating currency is intrinsically worthless then its lack of worth will be reflected in the forex markets. Fiat money, on the other hand, does not require a disciplined monetary of fiscal policy on the part of the issuing authorities; exchange rates are fixed by decree, which means the state also controls supplies of hard (foreign) currency.
by abu yahya September 28, 2008
Get the fiat moneymug. (FINANCE) a call option that is written by a party who possesses none of the underlying stock; a commitment to sell a fixed amount of something at a fixed price, of something one does not happen to have.
Writing an option means selling a certificate that guarantees the holder can buy a traded item for a guaranteed price (strike price). The person who writes the option is betting that the price of the underlying stock will go down (shorting a stock, AKA a short position). If the person writing the option is correct, then she makes money off the sale of the option, but does not have to worry about honoring the option, since it is out of the money and has no intrinsic value.
If the person writing the option is wrong, and the price of the underlying stock goes up, then she must buy the item at the higher spot price specifically to sell it at the low strike price ("short cover"). In rare cases, a person who makes this sort of error will actually drive the spot price much higher than it would have gone ordinarily.
Writing an option means selling a certificate that guarantees the holder can buy a traded item for a guaranteed price (strike price). The person who writes the option is betting that the price of the underlying stock will go down (shorting a stock, AKA a short position). If the person writing the option is correct, then she makes money off the sale of the option, but does not have to worry about honoring the option, since it is out of the money and has no intrinsic value.
If the person writing the option is wrong, and the price of the underlying stock goes up, then she must buy the item at the higher spot price specifically to sell it at the low strike price ("short cover"). In rare cases, a person who makes this sort of error will actually drive the spot price much higher than it would have gone ordinarily.
Naked option writing is quite risky because you can make only a limited amount of money. yet the risks are high.
by Abu Yahya April 15, 2010
Get the naked optionmug. (FINANCE) the situation in which a derivatives trader with a short position is wrong about the behavior of the market. Having sold shares of stock he doesn't own, he is now compelled to buy them at a higher price than he sold them for (in order to reimburse whomever he borrowed the shares from).
If the short position was taken by writing naked options (i.e., issuing call options of stock the trader doesn't happen to have), then the trader has to buy shares of underlying stock in order to honor the options.
It's extremely expensive for traders to have to cover their shorts.
If the short position was taken by writing naked options (i.e., issuing call options of stock the trader doesn't happen to have), then the trader has to buy shares of underlying stock in order to honor the options.
It's extremely expensive for traders to have to cover their shorts.
The surprising stock rally came as a shock. Nicholas Leeson had been riding high, but now he was furiously covering shorts, and driving the share prices higher still. By closing bell, he was ruined.
by Abu Yahya May 5, 2010
Get the covering shortsmug.