Archive for the ‘money’ Category

Lock, Stock & Money

Saturday, March 14th, 2009

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The idea of investing in stocks seemed like a bright prospect a few months back but now it sends shivers down the spines among prospective investors. Share investors have witnessed a tough time over the past six months. Investing in stocks or shares has always been a risky affair, but more so during the past few months as the stock prices went tumbling down, with a steep fall in the economy. Interestingly stock trading is not a new thing and its history can be traced back to the Romans, but the first company to issue stocks was the Dutch East India Company. They pooled in public investment and used it primarily for the building of ships.

Experts in the stock market claim that the one thing that is important for a person trading in stocks is his timing. Investors were quick to realize that they needed to be on the tip of their toes to trade effectively in the stock market. However in the olden days, not everybody had the time to keep a track on the stock prices on a daily basis, and that itself gave rise to a new profession- the Stock Broker. He kept a watch on all your stocks and helped you make a decision on what to buy and what to sell, and charged you a commission (called the brokerage) for his services.

With the advent of technology, the stock markets have seen a radical change over the years. Increasingly sophisticated broking software has not only made it easy for Stock Brokers to trade on the market, it has also meant that a newbie, with a little knowledge about the share markets can take a plunge. The internet has also made it easy for people to trade on stocks sitting at the comfort of their homes, with millions of dollars changing hands in a few milliseconds. Technology has made it possible for algorithmic trading to take place, wherein computer systems are programmed to buy or sell shares when a certain market condition is met.

As with all things related to money, the Stock Market has seen its share of financial scams amounting to millions of dollars. Among the various major scams that have hit the Stock Market hard, the earliest was in 1986 when Barry Minkow claimed to be building a multi-million dollar company and went public with a market cap of $200 million before being discovered that it was a mere scam. However the largest investor fraud ever committed by a single person amounting to a whopping $65 billion was the one orchestrated by Bernard Madoff. He introduced his Ponzi scheme, where instead of investing the money offered to him by his clients it was simply deposited to his business account in Chase Manhattan Bank.

A totally different form of stock scam came into picture in the form of the boiler room. A lot of people have been hit most by boiler room scams, where a smooth talking salesman calls up and tries to peddle worthless shares to unsuspecting customers. Police have called it the biggest threat to households, much bigger than credit card frauds. These are called boiler room scams because the people involved operate out of cramped office spaces with desks and telephones. Police have estimated that there are about 500 boiler rooms operating out of Spain, employing over 400 people. Other favourite Boiler room destinations are USA, Dubai, Berlin and France.

With the economy in recession, investors are thinking twice before plunging into the Stock Market. With statistical figures showing that approximately more than 50% of American households invest in the stock market, it is something that is still considered to be a good investment. It is just a matter of time before the Stock Market hits back with a vengeance. Better hold on to your money until then.

A small word called tax

Thursday, March 12th, 2009

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Filing taxes is something that is dreaded by the common man every year. However it seems our ancestors would be as dreadful as we are since the history of tax can be traced to as long back as 3000 BC in ancient Egypt. Tax was historically collected from the people in the form of a percentage of the crop yield, and this had to be handed over to the Pharaoh. Taxes have evolved over the years, and in modern taxation systems, tax is solely collected in the form of money, and is usually performed by a government appointed agency.

While the collection of tax has always been debated, funds collected by the taxation process are used for various purposes mainly for providing greater benefits and improve the level of basic services such as water, energy and waste management for the people. The rate of tax is fixed by the government, but can be increased depending on the economic condition of a nation. During the eighteenth century, England was at war, and the tax burden increased dramatically by 85% over this period.

In the modern society, taxes can be seen everywhere and they have become a part of life. With the introduction of the Value Added Tax (VAT) in 1954, all commercial activities were tagged with the tax label, and the consumer had to pay a tax for any commodity that he or she buys. History however has seen the weirdest of tax schemes. In Britain, a tax was imposed on windows by William Pitt, as it was considered to be a luxury possession. Nero the Roman Emperor taxed urine, as it was used as a raw material for a number of chemical processes. Peter the Great, the czar who modernized modern Russia is said to have introduced soul tax, for the maintenance of armed forces.

Tax havens evolved as a direct economic response to the principle of taxes, as places where taxes were levied at an extremely low rate or not levied at all. Tax havens can be traced to ancient Greece, where sea traders deposited foreign goods in Greek island to evade the two percent tax imposed by Athens. The oldest tax haven is said to be the Channel Islands dating as far back as 1006 A.D, although economic commentators suggest that the first “true” tax haven was Switzerland. Most European governments had to pay for reconstruction costs for damages suffered during the World War I using the taxpayer’s money, but Switzerland’s neutral policy during the war allowed it to maintain a low level of tax.

Evasion of tax is considered to be a crime, and the non-paying entity or individual can be subject to civil penalties such as fines or forfeiture or criminal penalties such as incarceration. In spite of this, individuals and companies try to evade tax, considering it to be a burden on their income. Individuals have tried various means to evade tax, with the strangest being a person trying to claim his dog as a dependent. Yet another instance saw a man trying to save tax for the money that he had made from donating sperms, claiming that he had been depleted.

With economies on a downturn, tax is becoming the focal point of all discussions on reviving shattered economic conditions. Council taxes have been increased in some places to bring some money in the exhausted council coffers, and Japan is considering cutting tax rates to boost economic demand. Tax has never been so much in the limelight, and it is becoming increasingly clear that this small three letter word will play a big role in the months to come.

The $2 and $100 Bills-The Rarer Currencies

Thursday, March 12th, 2009

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The first two dollar notes were called United States Notes or “Legal Tenders”. They were issued by the Federal Government in 1862, featuring a portrait of the first Secretary of the Treasury, Alexander Hamilton. In 1869, Thomas Jefferson’s portrait started being used and the same portrait has continued to be used for all two dollar United States Notes and all two dollar Federal Reserve Notes. Monticello was first featured as the vignette on the back of the two dollar United States Note in 1928. Monticello was Thomas Jefferson’s estate in Virginia.

In 1976, in celebration of the United States bicentennial, a two dollar Federal Reserve Note was introduced. Thomas Jefferson’s portrait was still on the face but Monticello was replaced on the back by a vignette of the signing of the Declaration of Independence. This painting of the Declaration of Independence was painted by John Trumbull. The original portrayed forty-seven people, 42 of whom were signers out of the fifty-six on the Declaration of Independence. Because of a limited amount of space on the two dollar note, five of the forty-seven were left off. The most recent printing of the two dollar note was in 2003 and at this time there are no plans to redesign it.

The first one-hundred dollar notes were also called United States Notes or Legal Tenders. They were issued by the Federal Government in 1862 and they featured a vignette of an American eagle. Benjamin Franklin first had his portrait on the one hundred dollar note in 1914, the first series of these Federal Reserve Notes. The one hundred dollar note is the largest denomination of Federal Reserve Notes that are currently issued in the United States. The life span of a one hundred dollar Federal Reserve Note is 89 months on average. This is much longer than other denominations of currency since this is rarer and circulated less than they are.

In 1996, the one hundred dollar Federal Reserve Note featured large portraits, watermarks and color-shifting ink. The notes also included micro-printing, which is lettering so small that it is hard to replicate, on the front of the note. “USA 100” is written in the numbers located in the lower left corner and “United Sates of America” is in one line on the left lapel of Benjamin Franklin’s coat.

Since 1928, the vignette on the back of the one hundred dollar note has featured an engraving of Independence Hall, the former State House of Pennsylvania, in Philadelphia. Independence Hall is often called the birthplace of our Nation because inside is where the Declaration of Independence was signed and where the Constitution of the United States was drafted. It has been said that the man and women in front of the hall close to the building are embracing but there is no record of that. The hands on the clock on the hall are set to 4:10. There doesn’t seem to be any explanation as to why this time was chosen.

ATMs - those amazing telling machines

Wednesday, March 11th, 2009

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Automated Teller Machines or ATMs have changed the way people do banking. Before the arrival of ATMs people had to wait for the bank to open, and stand in long queues to withdraw their own money, or just to know the balance on their account. Now ATMs are everywhere, in shopping malls, hospitals, offices and chances are that one is in your neighbourhood as well. Statistics have revealed that as of August 2006, there are over 1.5 million of these smart systems in operation.

Although the primary use of ATMs is for dispensing cash, these intelligent machines can be used for multiple purposes apart from bank-related functions. Since ATMs have a user interface at their disposal, they have been targeted by banks as a sales device, for displaying targeted advertising. Banks have recognized the huge potential for advertising of their own as well as third-party products and services on ATMs. In some countries ATMs are also used for purchasing commodities such as postage stamps, lottery tickets, train tickets, concert tickets etc.

ATMs as other technological devices have also been targeted by criminals to gain access to the cash lying inside these dispensers. Although ATMs are considered to be very secure, they have been subject to criminal attacks, with thieves attempting to get away with the entire ATM. Since ATMs are designed and constructed to be physically invulnerable, thieves resort to using construction machinery to demolish or uproot an entire ATM and steal any cash within. Criminals have also used explosives to blast open the ATM and get into its cash vault.

ATMs are quite secure for transactions, using advanced encryption techniques to encrypt sensitive information such as pin numbers, so that they cannot be sniffed across the network. To overcome this limitation, criminals have resorted to placing fake keypads on the ATM terminals to record the card number and pin. These are then used to gain access to an unsuspecting user’s accounts to withdraw cash or transfer money. High tech criminals also resort to a technique involving the installation of a magnetic card reader and a wireless surveillance camera to observe the user’s pin, and later use a fake card to dispense cash from the ATM.

Banks have resorted to various means to get around this of which the most successful have been the use of biometrics, where a user is identified using either one or a combination of his physical traits. Popular biometric techniques involve scanning of the iris or matching the fingerprints of the user with the ones stored in the bank’s database.  Other security techniques put in place by banks involve the development of intelligent sensors that detect the presence of foreign objects and trigger an alarm. Banks have claimed a 99% success rate, using these techniques.

In spite of a few shortcomings, ATMs continue to be a huge success and have proved to be highly popular thus making them a must for banks. However the future of ATMs remains uncertain. Although, statistics indicate that the numbers of ATMs are steadily on the rise and continue to make their presence felt at gasoline stations and shopping outlets, the advent of a cashless society and home banking can pose a serious threat to these marvellous machines. They also face fierce competition from an increasing rise of point-of-sale systems and smart cards.

Having celebrated their 40th birthday recently, these amazing machines could possibly be made extinct by paperless money in times to come.