Foundations of Finance and Investment Essay Example | Topics and Well Written Essays - 1500 words

Foundations of Finance and Investment - Essay Example The Repo rate is the short-term interest rate at which financial institutions such as banks and building societies can borrow money from the BOE for a two-week period. The MPC meets monthly to set the Repo rate as part of its monetary policy function to control inflation. Its decision on what this rate should be acts as a signal to the money markets of how much to pay savers and charge borrowers for the use of money. The Repo rate therefore acts as the baseline for the cost of money that can be loaned to customers, which can include other banks, in the form of mortgages and overdrafts (BOE, 2005). Many households and firms, however, borrow for longer time periods and prefer to fix borrowing costs in advance, either because this helps them plan their cash flows better or protects them from the future risk of rising interest rates. This is a gamble some lenders and borrowers take, since interest rates may also move the other way. Fixed long-term borrowing or interest rates are relevant to those who want fixed-rate mortgages for housing or to firms with long-term investment plans like expanding a factory that needs some years to pay off. Long-term interest rates ranging from one to ten years are calculated simply by taking an average of forecast short-term interest rates over the desired period. Short- and long-term interest rates are closely related, but differ on the basis of MPC decisions; the expectations of how the national economy will fare; the expected future inflation rates; and how likely the MPC will achieve its inflation targets (BOE, 2005). The direction of short-term rates is easy to determine because the figure depends on the latest interest rate decision of the MPC that can either raise or lower the Repo rate. Long-term rates, however, may go either way, determined by how the economy will perform many years from now. It can happen that whilst the MPC raises the Repo rate next month, ten-year rates may go down if the market thinks such a decision will cause rates to fall in the future. Future rates depend on how reliable the market finds the MPC (Barrell et al., 2006, p. 60). In deciding to keep the Repo rate at the same level in April 2006, the MPC considered several rigorously monitored variables such as U.K. inflation (down from 2.0% to 1.8%), money supply (M4, the sum of notes, coins, and so-called broad money consisting of what is held in bank and building society accounts, grew 12% in the year to February), economic growth (in line with first quarter trend rate at 0.6%), U.K. consumer spending and manufacturing (growing steadily), asset prices (rising prices of equities and houses), the sterling exchange rate (weakening or depreciating to the dollar and the Euro), risk of higher inflation (rising due to the increase in energy and oil prices), the economic performance of the U.S., the so-called Eurozone (EU countries that have the Euro as its common currency), and Japan (inflation, exchange rates, asset prices, etc.), wage pressures (rising average real product wage balanced by lower growth of average real consumption wage; the first refers to the re al cost incurred by employers whilst the second refers to the take home pay of employees), and consumer surveys on inflationary expectations (rising), a key emotional factor that influences personal decisions to either save or spend. Inflation - the rise in prices of a basket of goods and services in the whole economy - if

The Industrial Revolution Refer to side notes below Essay

The Industrial Revolution Refer to side notes below - Essay Example The so-called Industrial Revolution was indeed one of the most transformative events in human history. Starting in a small area of England and then spreading through the country, on to the rest of Europe and hence to much of the world, the growth in industrial methods of production would have profound influence upon lives throughout the world. While there is virtually unanimous agreement on the influence of the changes that occurred, there is more debate upon their causes and how they should be characterized. Those that affirm the "revolution" aspect of this industrial change concentrate upon the rapidity of development and the influence of individual men such as Thomas Watt and his steam engine. Historians who criticize such characterizations claim that the industrial change occurred in a more complex manner. The exact causes and even dates of the Industrial Revolution have been constantly debated by historians, and this effects whether they see it as a "revolution" or not. For example, Lewis Mumford (1971) suggests that its origins are in fact in the Middle Ages with the printing press as an archetype for modern industrialization. The monasteries that had kept learning alive after the Romans also insisted upon a regularized timetable throughout the day, again, according to Mumford, a precursor of the Industrial Revolution's factories. ... They see it as stemming from post Civil War changes in Britain in which national borders were meaningful and so the spread of disease through population movements was limited (Cipolla, 1994). This in turn led to a lowering of infant mortality and an increase in population. A larger population was an essential precursor to industrialization as it required both a big workforce and an adequate market size for its goods. Cipolla also suggests that the agricultural revolution in Britain, with the enclosure of land and more efficient food production techniques, led to labor being forced into cities. This growth in cities provided the workforce and market in which the industrial revolution could occur. However, the actual period of industrial change within England (which spread to the rest of the world within decades) did occur in a relatively short period between 1780-1830. While the factors suggested by the authors already discussed were important catalysts the actual period of change was very rapid and created conditions in which technology developed on an almost yearly basis. One of the most important aspects of this change was the sheer number of inventions and industrial developments that occurred in a very short period of time and within a concentrated geographical area. England is a very small country by most standards, being 200 miles at its broadest and only about 400 miles long. When an invention appeared in one place it was easy for it to be transported to another and to influence developments there. The Industrial Revolution can be characterized as a period of intense cross-fertilization of ideas, industrial developments and changes. Thomas Watt's steam engine led to mechanized machines.