The goal of an economic stimulus check is to give money to individuals, who will then go out and spend the money. But how effective is a check to every American toward stimulating the economy?
Lame Duck Session
In the few remaining weeks of this Congressional session and the Bush Administration, under consideration is a $100 billion bill which would extend help to states that have cut spending, increase food stamps, and allow extra unemployment benefits (Uchitelle & Calmes, 2008).
Democratic congressional leaders suggest the passage of two bills, one in this lame duck session, and a second larger bill after the inauguration for $150-$200 billion (Lightman, 2008).
The Effectiveness of a Stimulus
According to the Economist, the $92 billion in tax rebates which Americans received in July led to a growth in consumer spending of 1.7%.
This growth took place even as consumers managed high gasoline prices, unemployment, and tightening credit.
Without the stimulus, consumer spending may not have grown at all (Economist, 2008).
Limitations of a Stimulus
Macroeconomic Advisers, an economic forecasting firm, estimates that consumers spend only 30% of their checks, applying the remainder to debt or savings.
Other options include investment in infrastructure (such as roads, bridges, tunnels, etc.), assistance to state and local governments who may have to cut services to balance their budgets, and direct help for Americans through extension of unemployment, heating assistance, and food stamps.
However, the Congressional Budget Office estimates that the money for infrastructure development is generally spent at a rate of less than 30% per year, and funds given to states may also be saved by those states.
Therefore, it may be as effective to increasing consumer spending to give funds directly to the individuals (Economist, 2008).
Obama’s Stance
Even before Barack Obama was elected president, he supported the proposed economic stimulus.
He has also suggested an “emergency energy rebate”, $500 to every worker or $1000 for every family, paid for by a tax on the oil companies.
As reported by the New York Times, the economic stimulus would require at least $200 billion dollars.
Obama’s representatives want the checks to arrive before tax returns are filed in April (Uchitelle & Calmes, 2008).
Conclusion
An economic stimulus appears likely, as it has the support of the president-elect and the outgoing and incoming Congress. If it can stimulate consumer spending as the July stimulus did, it may have its intended effect of helping to stave off further recession.
source
Economist. (2008). The Economy: In Need of More Band-Aids. The Economist.
Available:
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=12066188 [2008,
November 9th]
Lightman, D. (2008). Can a $100 Billion Stimulus Save a $14 Trillion Economy? McClatchy
Newspapers. Available: http://www.mcclatchydc.com; [2008, November 9th].
Uchitelle, L., & Calmes, J. (2008, November 5th). A Towering Economic To-Do List for Obama.
New York Times. Available: www.nytimes.com/2008/11/06/business/06challenges.html [2008,
November 9th].
Read more at Suite101: Economic Stimulus 2009: A Priority for US President-Elect Obama http://www.suite101.com/content/economic-stimlus-2009-a77542#ixzz18333TFh9
2010 Stimulus check
The 2010 stimulus check is set to help over 90% of Americans, but how will this affect you? The changes operated after the implementation of the stimulus have shown themselves clearly in 2009 by way of the stimulus check a high percentage of citizens have received, but its continuation in 2010 will be a bit different. The way in which the stimulus will work consists in a decrease in federal taxes, which will manifest itself through increases in average Americans’ paychecks.
But how do you know you qualify for this generalized federal tax deduction that is part of the government’s stimulus package and how should you go about receiving what the government is offering you, like a 2010 stimulus check ? First of all, in order to qualify, you must be paying social security; this means you have to be employed (or self-employed), i.e. you must be working and paying taxes. You must also make sure that your income does not exceeded the amount of $95,000 per year, or, if you are married and wish to submit a joint stimulus consideration request, then the joint income of the two applicants mustn’t exceed $190,000 per year. You must also keep in mind that certain restrictions to the federal tax cut the stimulus will grant you apply if your annual intake exceeds $75,000 or if you and your spouse’s joint annual income exceeds $150,000.
The federal tax deduction comprised in the stimulus will put in (or rather, not take out of) your pocket the sum of $400 (or for a joint application a total of $800). This is money the government normally would have taken out of your salary that you are now allowed to keep. It’s the same amount you will receive in 2009, only divided along 12 months instead of 9. This, in case you meet all the requirements and benefit from the full tax deduction. The amount of the deduction will be smaller depending on where you stand on the annual income chart. You will not be receiving a check in the mail or a check from your employer to mark the stimulus tax cut, but rather, you will be receiving an extra few dollars every month on top of what you’ve been earning so far. Those with maximal benefits from the stimulus will cash an extra $33 every month for the duration of the 2010 stimulus check thanks to the stimulus plan. That means that if you are filing for the federal tax deduction with someone else, together you will receive $66 every month.
If you are working two jobs and qualify for the federal tax cut, you will probably need to be extra careful. As it turns out, you stand to get a tax deduction on both paychecks, which means that you that you have double benefits, which unfortunately isn’t possible. Even if you are working two jobs, you only qualify for one share of the stimulus plan, which means that if you receive the something extra on your paychecks from both jobs, you will either have to notify one of your employers instructing them to desist, or you will be required to return the extra money after the end of the fiscal year.
The tax deductions that accompany the stimulus plan are meant to make it easier to navigate through the economic crisis, for the hard working Americans who find themselves having difficulty keeping up with the ever changing economic climate. While it might not seem like much on a grand scale, the federal tax deduction comprised in the 2010 stimulus check can make things a lot easier for many of those who are struggling to make ends meet.
But how do you know you qualify for this generalized federal tax deduction that is part of the government’s stimulus package and how should you go about receiving what the government is offering you, like a 2010 stimulus check ? First of all, in order to qualify, you must be paying social security; this means you have to be employed (or self-employed), i.e. you must be working and paying taxes. You must also make sure that your income does not exceeded the amount of $95,000 per year, or, if you are married and wish to submit a joint stimulus consideration request, then the joint income of the two applicants mustn’t exceed $190,000 per year. You must also keep in mind that certain restrictions to the federal tax cut the stimulus will grant you apply if your annual intake exceeds $75,000 or if you and your spouse’s joint annual income exceeds $150,000.
The federal tax deduction comprised in the stimulus will put in (or rather, not take out of) your pocket the sum of $400 (or for a joint application a total of $800). This is money the government normally would have taken out of your salary that you are now allowed to keep. It’s the same amount you will receive in 2009, only divided along 12 months instead of 9. This, in case you meet all the requirements and benefit from the full tax deduction. The amount of the deduction will be smaller depending on where you stand on the annual income chart. You will not be receiving a check in the mail or a check from your employer to mark the stimulus tax cut, but rather, you will be receiving an extra few dollars every month on top of what you’ve been earning so far. Those with maximal benefits from the stimulus will cash an extra $33 every month for the duration of the 2010 stimulus check thanks to the stimulus plan. That means that if you are filing for the federal tax deduction with someone else, together you will receive $66 every month.
If you are working two jobs and qualify for the federal tax cut, you will probably need to be extra careful. As it turns out, you stand to get a tax deduction on both paychecks, which means that you that you have double benefits, which unfortunately isn’t possible. Even if you are working two jobs, you only qualify for one share of the stimulus plan, which means that if you receive the something extra on your paychecks from both jobs, you will either have to notify one of your employers instructing them to desist, or you will be required to return the extra money after the end of the fiscal year.
The tax deductions that accompany the stimulus plan are meant to make it easier to navigate through the economic crisis, for the hard working Americans who find themselves having difficulty keeping up with the ever changing economic climate. While it might not seem like much on a grand scale, the federal tax deduction comprised in the 2010 stimulus check can make things a lot easier for many of those who are struggling to make ends meet.
Basic financial statements (Profit and Loss Account)
By RAYMOND ROY TIRUCHELVAM
FOR a non-finance person, evaluating a company's financial can be daunting, let alone understanding it to form an opinion. The most basic form of financial statements comprises the Profit & Loss Account or sometimes referred to as Income Statement and the Balance Sheet.
Another two statements that make a complete financial information for reporting purposes comprise the Statement of Retained Earnings and Statement of Cash Flow.
The objective of a financial statement is to provide information about the financial position, performance and changes in the position of an enterprise.
The Balance Sheet represents the financial position or net worth of a business entity on a specified date. The presentation is based on a fundamental accounting equation of Assets = Liabilities + Shareholders Fund. The main categories of assets are usually listed first, usually in order of liquidity. Next follows liabilities, short and long term, which represent payables and borrowings held by the entity.
The difference between the assets and liabilities (Assets Liabilities = Shareholders Funds), is known as Shareholders Funds, or sometimes referred to as owner's equity, that entails the company's capital plus retained earnings. Borrowings (liability) or owner's money (owner's equity) are the two means used for financing an asset.
Mathematically, over a period of time, if the assets grow bigger than the liabilities, it would mean that the entity has made a profit (which represents the essence of the Profit & Loss Account); this is reflected via an increased asset base (taking shape in many forms from cash, inventories, accounts receivable, fixed assets or investments).
Reverting to the Balance Sheet equation, the Shareholders Fund will reflect the increment. Since the entity's capital remains constant (unless the new assets are caused by new share issues), the increment is credited to a special account called Retained Earnings, as the name denotes.
Next, the Profit & Loss Account represents summarised transactions of an entity's performance over a given period, showing its profitability (or losses). Acting as the management's scorecard, it identifies the revenues and expenses undertaken which results in either a profit or a loss, based on the fundamental accounting concept of: Revenue Expenses = Profit (or Loss if expenses exceed revenue).
This in return will drive the direction of the Shareholders Fund (in particular Retained Earnings sub-category), for good (profit) or for worse (loss).
The particulars of a regular company's Profit & Loss Account would look as in Table 1.
There is also a category of item to be on the lookout called Unusual Item, which represents non-recurring non-revenue based transaction undertaken by the entity that results in a profit or loss. Examples of MAS selling aircraft, discontinuing a business line, incurring losses from natural disaster, writing down of investment value, are a few, which should be evaluated separately from the results from operations.
Due to its importance, EPS or Earnings Per Share is also required to be disclosed at the end of the Profit & Loss account. It presents the earnings divided by the total ordinary shares outstanding.
This single measure differentiates the efficiency in the earnings between companies, and represents the most important criteria in determining the price of the entity's shares and is used as a component to derive the all important PE or Price to Earnings ratio.
A large Retained Earnings balance as compared to the total Shareholders Fund, will denote a profitable company (accumulation of profits over the years), and a negative Retained Earnings (or Retained Loss) reflects the opposite. In extreme cases, the Retained Loss (debit balance) can overtake the Share Capital (credit balance), thus resulting in a negative Shareholders Fund. One surely would not want to invest in such a company.
Some listed companies, when the Retained Earnings gets so large (coupled with other factors such as inability to pay out dividend), reward the shareholders via Bonus Issue exercise, whereby part of the retained earnings are converted into new shares, accruing to existing shareholders.
This not only represents a short cut of the dividend payout, but also a tax free option via capital returns.
Raymond Roy Tiruchelvam, who has problems reconciling his gross habits with his net income is a financial planner with SABIC Group of Companies.
FOR a non-finance person, evaluating a company's financial can be daunting, let alone understanding it to form an opinion. The most basic form of financial statements comprises the Profit & Loss Account or sometimes referred to as Income Statement and the Balance Sheet.
Another two statements that make a complete financial information for reporting purposes comprise the Statement of Retained Earnings and Statement of Cash Flow.
The objective of a financial statement is to provide information about the financial position, performance and changes in the position of an enterprise.
The Balance Sheet represents the financial position or net worth of a business entity on a specified date. The presentation is based on a fundamental accounting equation of Assets = Liabilities + Shareholders Fund. The main categories of assets are usually listed first, usually in order of liquidity. Next follows liabilities, short and long term, which represent payables and borrowings held by the entity.
The difference between the assets and liabilities (Assets Liabilities = Shareholders Funds), is known as Shareholders Funds, or sometimes referred to as owner's equity, that entails the company's capital plus retained earnings. Borrowings (liability) or owner's money (owner's equity) are the two means used for financing an asset.
Mathematically, over a period of time, if the assets grow bigger than the liabilities, it would mean that the entity has made a profit (which represents the essence of the Profit & Loss Account); this is reflected via an increased asset base (taking shape in many forms from cash, inventories, accounts receivable, fixed assets or investments).
Reverting to the Balance Sheet equation, the Shareholders Fund will reflect the increment. Since the entity's capital remains constant (unless the new assets are caused by new share issues), the increment is credited to a special account called Retained Earnings, as the name denotes.
Next, the Profit & Loss Account represents summarised transactions of an entity's performance over a given period, showing its profitability (or losses). Acting as the management's scorecard, it identifies the revenues and expenses undertaken which results in either a profit or a loss, based on the fundamental accounting concept of: Revenue Expenses = Profit (or Loss if expenses exceed revenue).
This in return will drive the direction of the Shareholders Fund (in particular Retained Earnings sub-category), for good (profit) or for worse (loss).
The particulars of a regular company's Profit & Loss Account would look as in Table 1.
There is also a category of item to be on the lookout called Unusual Item, which represents non-recurring non-revenue based transaction undertaken by the entity that results in a profit or loss. Examples of MAS selling aircraft, discontinuing a business line, incurring losses from natural disaster, writing down of investment value, are a few, which should be evaluated separately from the results from operations.
Due to its importance, EPS or Earnings Per Share is also required to be disclosed at the end of the Profit & Loss account. It presents the earnings divided by the total ordinary shares outstanding.
This single measure differentiates the efficiency in the earnings between companies, and represents the most important criteria in determining the price of the entity's shares and is used as a component to derive the all important PE or Price to Earnings ratio.
A large Retained Earnings balance as compared to the total Shareholders Fund, will denote a profitable company (accumulation of profits over the years), and a negative Retained Earnings (or Retained Loss) reflects the opposite. In extreme cases, the Retained Loss (debit balance) can overtake the Share Capital (credit balance), thus resulting in a negative Shareholders Fund. One surely would not want to invest in such a company.
Some listed companies, when the Retained Earnings gets so large (coupled with other factors such as inability to pay out dividend), reward the shareholders via Bonus Issue exercise, whereby part of the retained earnings are converted into new shares, accruing to existing shareholders.
This not only represents a short cut of the dividend payout, but also a tax free option via capital returns.
Raymond Roy Tiruchelvam, who has problems reconciling his gross habits with his net income is a financial planner with SABIC Group of Companies.
Madoff trustee sues HSBC for nine billion dollars
NEW YORK, Tuesday 7 December 2010 (AFP) - The trustee charged with recouping assets for victims of Wall Street fraudster Bernard Madoff is suing British banking giant HSBC and related entities for at least nine billion dollars.
In a statement issued Sunday, Irving Picard accused the firms of enabling Madoff's massive Ponzi scheme by creating, marketing and supporting "an international network of a dozen feeder funds based in Europe, the Caribbean and Central America."
HSBC and the related funds led investors to direct over 8.9 billion dollars into Bernard L. Madoff Investment Securities LLC (BLMIS) -- Madoff's fraudulent investment advisory business, according to Picard.
"The defendants also earned hundreds of millions of dollars by selling, marketing, lending to and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme," despite being aware of the fraud, he added.
Italian bank UniCredit, Austrian banker Sonja Kohn and her Bank Medici are among those accused of helping the former Nasdaq chairman expand his scheme.
"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said.
"The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."
Last week, Picard said he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam and he has filed a suit against Swiss bank UBS seeking two billion dollars in damages for its part in the massive fraud.
Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.
Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.
The crime rocked Wall Street, where Madoff was a pillar of the New York and Florida Jewish communities.
Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims.
Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.
Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested.
Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina.
His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.
MySinchew 2010.12.07
In a statement issued Sunday, Irving Picard accused the firms of enabling Madoff's massive Ponzi scheme by creating, marketing and supporting "an international network of a dozen feeder funds based in Europe, the Caribbean and Central America."
HSBC and the related funds led investors to direct over 8.9 billion dollars into Bernard L. Madoff Investment Securities LLC (BLMIS) -- Madoff's fraudulent investment advisory business, according to Picard.
"The defendants also earned hundreds of millions of dollars by selling, marketing, lending to and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme," despite being aware of the fraud, he added.
Italian bank UniCredit, Austrian banker Sonja Kohn and her Bank Medici are among those accused of helping the former Nasdaq chairman expand his scheme.
"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said.
"The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."
Last week, Picard said he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam and he has filed a suit against Swiss bank UBS seeking two billion dollars in damages for its part in the massive fraud.
Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.
Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.
The crime rocked Wall Street, where Madoff was a pillar of the New York and Florida Jewish communities.
Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims.
Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.
Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested.
Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina.
His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.
MySinchew 2010.12.07
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