| Bad Bank | Proposed Government-run Bank That Would Allow Private Banks To Unload Their Toxic Assets. |
| Bad debt | A debt that has been defaulted on, or has little likelihood of being repaid. Bad debt was at the centre of the 2007 subprime mortgage crisis (see entry: subprime mortgage crisis). |
| Bailout | A measure designed to rescue ailing banks or companies, allowing them to operate at normal capacity in a time of crisis. A prime example is the controversial $700 billion bailout approved towards the end of George W. Bush’s presidency to address the subprime mortgage crisis (see entry: TARP). |
| Bankster | Combination Of “banker” And “gangster” (revival Of Term From The ’30s). |
| Basis point | A numerical unit used to express interest rates. 100 basis points = 1%. |
| Bear market | A market on the downswing (see entry: Bull market). |
| Bretton Woods agreement | An international accord signed in 1944, designed to create an international financial infrastructure after the tumult of the Second World War. The name is taken from the site in New Hampshire where the meeting took place. |
| Bubble | A phenomenon in which prices are overly or artificially inflated in a fashion that does not necessarily reflect actual supply and demand. The textbook example of a bubble is the “Dutch Tulip Bubble” of 1637. When tulip prices crashed, the entire economy – including its credit system – plunged into crisis. |
| Chiconomic | Style-conscious On A Budget. |
| Clawback | System By Which A Financial Company Can Take Back Bonus Payments Paid To Employees In Previous Years To Make Up For Losses In The Current Year. |
| Commodities | Raw goods, such as pork bellies, cattle, oil, etc. that are traded on the market like any other financial instrument, in accordance with fluctuations in supply and demand. |
| Cramdown | Involuntary Imposition By A Court Of A Reorganization Plan Over The Objection Of Creditors. (obama And Senate Democrats Support Legislation That Would Allow Federal Bankruptcy Judges To “cram Down” Mortgage Loan Balances On The Primary Residences Of People Who File For Bankruptcy Protection.) |
| Crecession | A Suggested Term For The Current Crisis. |
| Deflation | Falling prices; distinct from slowing inflation, where prices are still rising albeit at a slower rate. |
| Demand | Demand refers to how much stuff people are willing and able to buy. When demand for goods and services falls—for example, when consumers don’t feel they have enough money to keep spending—business can slow down so much that a recession begins. Currently, demand is running high—too high to be met by the supply—which has led to rapidly rising inflation. High demand typically makes a recession less likely, though if the Federal Reserve tamps it down too much by raising borrowing costs, all bets are off. |
| Depression | If a recession (see above) gets bad enough, it’s called a depression. When this last happened, during the the Great Depression that began in 1929, one in four workers couldn’t find a job, people were forced to build encampments of cardboard shacks, known as Hoovervilles, and others rode through the country on freight trains in fruitless search of work.12 Fortunately, few if any economists are even considering the possibility of something like that happening again any time soon. |
| Derivative | A financial instrument mathematically derived from other, more basic financial instruments, designed to hedge against unexpected losses in the underlying instrument. Examples of derivatives include options, futures, and mortgage-backed securities. Derivatives are a form of statistical arbitrage, in which traders exploit small market anomalies to make a profit. |
| Doing More With Less | A Management Cliche Used To Justify Downsizing And Belt-tightening. The Expression Goes Back To The 19th Century But Became A Catchphrase During The Austerity Measures Of World War Ii. (hear More In This Npr Report.) |
| Duppie | Acronym For “depressed Urban Professional” (also “downwardly Mobile Urban Professional”). |
| ECB (European Central Bank) | Established in 1998 and located in Frankfurt, it is the central bank of the Eurozone, i.e. the group of nations that have adopted or are in the process of adopting the euro single currency. The ECB is the sole body with the authority to print euro currency. The president of the ECB is currently French national Jean-Claude Trichet. |
| Economic Growth | When real GDP is increasing, or expanding, we have economic growth. It’s considered a good thing for consumers because as more goods and services are produced, incomes increase and people have more access to those goods.11 The economy tends to go through cycles of economic expansion and contraction (see definitions below), despite the efforts of governments to keep their economies growing steadily. |
| Expansion and Contraction | Economists describe the up-and-down seesaws of the economy as a “business cycle” that goes through periods of growth (expansion) and then contraction. During the expansion part of the cycle, factories make more stuff, companies do more business, and people make more money, so real GDP goes up. The opposite happens when the economy shrinks, or contracts, during a recession. |
| FDIC (Federal Deposit Insurance Corporation) | Set up by the US government, the FDIC insures individual banking accounts in the event of bank failure. Part of the controversial 2008 financial bailout package included increasing FDIC coverage. Official site |
| Federal Reserve | Also known as the “Fed”, this Washington-based institution governs all US banks and acts as the country’s central bank. |
| Furcation | |
| GDP (Gross Domestic Product) | The total monetary value of all goods and services produced by a country, minus the differential between import and exports. This is different from GNP, or Gross National Product, in that the latter includes the differential between money made overseas by Americans and money made in America by foreigners. |
| Global recession | The IMF defines a global recession as one in which global GDP growth is less than 3%. (see entries: IMF and Recession) |
| Hard Times | An Old Phrase That Makes An Appearance Whenever The Economy Suffers |
| Hedge fund | A type of investment bank, usually with a relatively small staff, that specialises in high-yield investments that are “hedged,” or offset, by multiple positions to minimise risk. |
| Homedulgence | The Tendency For Consumers In A Recession To Socialize At Home. |
| Icelandic financial crisis | In late 2008, Iceland’s three largest banks collapsed, wreaking havoc on the economy, damaging the currency, and entailing losses for account holders outside of the small island state. The Icelandic government demanded and received bailout funds from the IMF. The nation’s government summarily resigned in 2009. |
| Kerviel, Jérôme | The total monetary value of all goods and services produced by a country, minus the differential between import and exports. This is different from GNP, or Gross National Product, in that the latter includes the differential between money made overseas by Americans and money made in America by foreigners. |
| Market correction | When a bull market plummets, this phenomenon is sometimes referred to as a market correction. This is based on the assumption that the market was over-valued to begin with. |
| Output | Output is the total amount of goods and services produced by the economy. Real GDP (see above) is one way to measure output. Recessions are characterized by a decrease in economic output. |
| Porkulus | Epithet Used By Conservative Opponents Of The Stimulus Package |
| Prime interest rate | The base interest rate set by central financial entities like the ECB. |
| Pyramid/Ponzi scheme | A type of financial fraud in which a fund manager uses new investors to pay off old investors. |
| Rate cut | The lowering of an interest rate. An economic governing entity such as the ECB might choose to lower its interest rate in order to stimulate spending, lending and job creation. |
| Real GDP | Real gross domestic product, or real GDP, is a measure of how much the country produces, or economic output (see definition below). It’s tracked by the Bureau of Economic Analysis and is an estimate of the total value of all the goods and services produced in the U.S. in a given year. If real GDP is shrinking for two or more quarters in a row, that usually means the economy is in a recession, but not always (see definition above). The change in real GDP is usually expressed as a percent change, and the quarterly change is often given in an annualized form, meaning as if GDP grew at that quarterly pace for four quarters (one year). |
| Recession | Two or more consecutive quarters of declining GDP, or “negative economic growth”. |
| SEC (Securities and Exchange Commission) | A US governmental body formed as a byproduct of the Securities Act of 1933 at the height of the Great Depression. Its intention was to prevent crashes such as that which occurred in 1929, as well as prevent fraud and corruption. |
| Security | An umbrella term for financial instruments that can be bought and sold, including stocks, bonds, options, and futures. |
| Shovel-ready | Used To Describe Infrastructure Projects That Are Ready To Go When Stimulus Money Is Available. Winner Of The Most Likely To Succeed Category In The American Dialect Society’s 2008 Word Of The Year Voting |
| Soft Landing | Like an airplane, you want a “soft landing”—not a crash—for the economy if you’re trying to deliberately slow it down. That’s why the term is often used to describe the Federal Reserve’s goal for slowing down the economy in order to tamp down inflation.9 |
| Stagflation | Stagflation—a portmanteau of “stagnation” and “inflation”—is just as ugly as it sounds. It means we get the worst of both worlds—an overheating economy where prices are rising too fast, and the high unemployment rates of an economy that’s growing too slowly. |
| Stim Package | |
| Stimulus package | An umbrella term for measures taken to jump-start an ailing economy. Stimulus packages generally draw on fiscal policy tools, such as tax rebates for houselholds and firms, to boost demand. A prime example is the $800 billion package proposed by Obama as he took up office. |
| Stress Test | |
| Subprime mortgage crisis | A financial disaster that began in 2007, when US homeowners who had been granted credit beyond their means all began to default at once. This created a chain reaction, exposing banks that issued the loans, as well as investors in collateralised mortgage options (CMOs – financial instruments dependent upon the healthy functioning of the mortgage market), and investors who did not realise their investments were linked to CMOs. In turn, businesses found they could no longer operate because banks were unable to lend them money. Some believe the subprime mortgage crisis to have initiated the present worldwide financial crisis. |
| Sustainable banking | Socially conscious banking practises, analogous to the idea of sustainable development. |
| TALF (Term Asset-Backed Securities Loan facility) | A safety net facility created in November 2008 as part of the Bush administration’s financial bailout package, designed to make potential investors more assured in the safety of their investments. |
| TARP (Troubled Asset Relief Programme) | The main component of the 2008 financial bailout package, in which $700 billion was allocated to ease the subprime mortgage crisis by pumping cash into ailing banks. |
| Three-legged Stool | Obama’s Metaphor For A Multi-pronged Approach To Economic Recovery. |
| Tiger | |
| Trade deficit | Occurs when the total monetary value of imports exceeds the total monetary value of exports. |
| Trade surplus | Occurs when the total monetary value of exports exceeds the total monetary value of imports. |
| US Treasury | The bank that handles the US government’s own funds. The term is often used to refer to the US Department of the Treasury, in charge of managing federal revenue and printing paper currency. The head of the US Treasury is Timothy Geithner. Official site |
| World Bank | One of two major institutions set up at Bretton Woods (see entry), the World Bank makes loans to nations, focusing on long-term global financial stability and development projects. The World Bank also publishes important economic indicators to measure the development of each of the world’s countries. The head of the World Bank is US national Robert Zoellick |
