A Brief History of Money

As credit and debit cards gradually take over the sphere of purchasing, money becomes less and less a physical thing. Whereas a decade ago satirists were drawing images of moguls swimming in a sea of bills, this satire is shifting to illustrate these same moguls now depositing checks with too many zeroes into overseas bank accounts. Even in our personal lives, carrying cash rarely has many applications—cards are accepted everywhere, and even when they aren’t there’s almost always an ATM within reach. But as we become more disconnected from our understanding of what is actually signified by our bank balance, by our available funds, it becomes important to reminisce on what the dollar physically is.
 
American currency has undergone a few major shifts. In the last decade, we’ve seen changes to the $5, $10 and $20 bills up to $100 bills, shifting from using the classic $1 style to a purplish numbering and much larger numerals—in many instances as an attempt to keep up with current counterfeiting technology. Printed money is painstakingly constructed, both for design and in an effort to make it harder to duplicate the process. This effort starts with engraving the plates, which are used for the intaglio printing onto the linen-cotton composite bills. Each bill is stamped with a force of around 10,000 psi, which is responsible for generating the raised texture of the ink.
 
Classically, what we understand as dollar bills used to be referred to as bank notes. They originated as a promissory note from banks to pay the bearer in coins, but as currencies shifted and inflation began working on a global scale, they soon became currency in their own right. This is where the shift from bills being produced by the banks themselves to being produced by, in many countries, a nationally appointed ‘central bank’ took place, gradually accepting them as indicators of a nation’s currency. Currently, these bills are printed at the Bureau of Engraving and Printing.
 
Coins go back much further, intended as a form of currency with a physical form that directly correlated to its value. This value of coins is known as their ‘melt value’, how much the coin is actually worth from a use standpoint when the metal is melted down and used for practical purposes. As inflation continued over centuries, this gradually became more and more obsolete, but coins maintain this intrinsic quality regardless.
 
It’s easy to lose track of spending when you aren’t handing over the coins and bills yourself. Without something physical and tangible to associate your wages and payments with, it becomes much easier to give. Keep in mind just what you’re paying with every time you use your card, regardless of where that actual, physical money may be.
 
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Consumer Confidence and the Housing Uptick

By all accounts, the news coming from the Case-Shiller home price index is good news, an average increase of 10.9% is nothing the scoff about (http://bit.ly/6Ivqgq). Granted, this is an average–areas like San Francisco experienced explosive growth, up 22.2% which led to some skewing of the numbers, but it’s irrefutable that the signs all point to steady growth in the housing market. This isn’t just good news for the housing market, of course. As one of the biggest roadblocks to a full-fledged economic recovery, improvement in the housing market is both a sign and an imminent promise of the economy on a whole recovering. Here are a few reasons why it’s an important shift and what possible outcomes can be expected from it.
 
The why:

     

  • Housing is valuable again.  For the last couple of years, homeowners, real estate agents, and anyone in the business surrounding housing found themselves in something of a rut. Whether you made a business out of handling the various aspects of buying and selling homes, or you were looking into buying or selling a home yourself, the market was in such bad shape that it seemed like a bad idea even for buyers. Now the prospects of making a valuable return on a past investment are starting to look better by the day.
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  • The newest generation entering the workforce can actually look forward to owning a home again.  Once every four months it seems, some new study will come out talking about how the current generation leaving high school and college to enter the workforce finds itself disproportionately living in rentals or living with family. The economy hasn’t been in the best shape for the students making their way out, but with the surge in housing prices, it’s definitely looking to pick up.

 
The what:

     

  • Economic growth, in general.  Simply put, if one area of the economy is thriving, it’s more likely to carry some of those profits into other areas of the economy, particularly for an area as vast as the housing market. Not only will a stronger housing market allow all of the enterprises surrounding it to prosper, it’ll also provide families with more options for investments and most importantly collecting returns on those investments.

 
Does the housing market improvement mean we should throw our hats in the air and rejoice, claiming the recession is over? Far from it. Should this still be viewed as a sign of progress and potential future growth? Definitely. Growth is happening, steadily, and the housing market movements are an excellent litmus test for determining what’s left to come.
 
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Mortgage Matters: The Streamlined Modification Initiative

In spite of a decade characterized by nearly every housing catastrophe possible under the sun becoming a reality, the Federal Government is giving their replenishment efforts another powerful go with the “Streamlined Modification Initiative”. Going into effect on July 1st, the initiative itself will allow “eligible borrowers who are at least 90 days delinquent on their mortgage an easy way to lower their monthly payments and modify their mortgage without requiring financial or hardship documentation” (http://1.usa.gov/Yf9oA5). The biggest impact of this will be helping slightly disadvantaged borrowers maintain their status of home ownership, while similarly extending the life of their payments.
 
The effects of this are manifold, but most obviously it’s a means of ensuring that there will still be money flowing into housing, rather than mortgages becoming so stagnant that the market collapses in on itself again. While the initiative stipulates that borrowers will be extending the life of their debt to 40 years, that’s 40 years where the lenders are likely to be getting their money back from their borrowers, opposed to 30 years with a higher risk of defaults. This also means that the borrowers themselves aren’t going to have that extra spending or investing agency until an extra decade passes from their time of initial mortgaging. While the long-term effects of this on consumer spending and the economy is still unknown, in the short run it’s an attempt to simply make homeownership a less tenuous position for many families.
 
This is, ultimately, an initiative acting as a double-edged sword. There’s talk on both sides of the fence about this being the swan song for the traditional 30-year mortgage, and whether or not that’s a good thing. It’s good in that it’s an attempt to make up for the fact that families are having a harder time staying afloat (http://huff.to/V1Zled) and are finding themselves with less purchasing power than ever before. This problem coupled with the incoming generation expected to take over the reins of the economy struggling under a $1.1 trillion student debt burden (http://nyti.ms/12ia08t) and finding themselves, as a result, less likely to invest in much of anything other than keeping food on their table (fewer cars, fewer homes, fewer marriages, and little to no savings) this is, in the short term, something that seems to be somewhat necessary. As with any major piece of legislation governing such a large financial sector, keeping an eye on both how well this initiative works and how likely it is to continue past its August 1st, 2015 termination date will help you make smarter decisions for yourself, your finances, and your family.
 
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In The Wake of Austerity: One month and counting.

Between the fiscal cliff at the beginning of the year and the automatic budget cuts at the beginning of March, the United States has been making a lot of steps to try and reduce the deficit in the form of implementing far-reaching budget reforms. The effects of March’s budget cuts haven’t been fully felt yet, and we’ll probably still be feeling them for years to come as new problems arise.

 

The economy is reacting, as any economy would, to the sweeping changes, and while many economists feared that the wounds of the last few years of recession were still too fresh for the economy to handle such widespread budget reform, the U.S. has weathered the first month, though with a few distinct slowdowns in hiring. (http://econ.st/14JO6hC) Government hiring went down by about 7,000 expected for the month, alongside retail and construction/manufacturing jobs reporting significant drops in hiring rates. This coupled with the recent news that unemployment similarly fell, but fell because the eligible workforce was shrinking rather than from increased hiring from employers means the growth we’ve been seeing over the last year is going to be hitting a major speed bump. (http://n.pr/XuvQa0)

 

If nothing else, these effects can be looked at not as the end but a new beginning—the government is doing its best to get its deficit back under control, and while a number of important programs and jobs were sacrificed in order to do so, the only real way forward from here is a tentative upward trajectory. The hardest part is over with, and while we’re only a month out of the freshly-budgeted March 2013, there hasn’t been any drastic shifts for the worse. While growth has slowed, the economy is still technically growing, and with the government running more efficient than ever, once the growing pains are over with many economists are anticipating a much stronger economy for the rest of the year.

 

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