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GCFLASH
Hot Off the Press!
Tuesday, July 1, 2008 - Edition #461
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Weekly Spotlight
Information is your best protection against cybercrime. Visit GCF's Security Center for information to help you better understand the types of threats consumers face today when conducting business online, tips to help prevent you from becoming a target, and resources for victims.
1st Flash:
WHAT IT MEANS TO YOU WHEN THE FED SAYS....
The Federal Reserve met last Wednesday for their regular review of monetary policy. Experts always differ over the anticipated result. Will rates continue their downward trend to ward off recession? Will they increase the fed funds rate to buffer against inflation? Financial analysts stay glued to every word that comes out of these meetings, sometimes what they don't say is as equally important as what they do say. We hear about the Fed lowering rates, yet mortgage rates have been steadily increasing. So what, exactly, does this mean to the average consumer? There are several key rates to consider in monetary policy. The rate we hear about in these meetings is the fed funds rate. This is the rate banks charge one another for overnight loans. It doesn't correspond to consumer loan rates, it's merely considered a benchmark. The Fed typically lowers this rate when the economy is slowing. It's a move to spur financial activity because the cost of borrowing money is made cheaper. When they're worried about inflation, they'll raise the rate to try to level the field. This shouldn't be confused with the prime rate, which is generally three percentage points higher than the fed funds rate. The prime rate is more closely linked to consumer loan rates as several loan types use it as their basis. Those with variable rates, such as a home equity line of credit, adjustable-rate mortgage and credit cards, set their Annual Percentage Rate (APR) as a stated amount above or below this key number. For example, GCF Bank's home equity line of credit carries a rate of prime minus .75 percent, currently an APR of 4.25 percent. Fixed loan rates are determined by market forces. Inflationary concerns and downturn of the housing market have caused mortgage rates to trend higher. Mortgage rates are more closely tied to the yield on the 10 year Treasury note, which gives a long-term look at a fixed investment. When the Fed met last week, they decided to leave rates unchanged. This led many to believe they'll soon begin a trek upward amidst inflation concerns. If you're thinking about buying a house, you might want to move quickly before the rates actually do rise. While there is not a direct link between the fed funds rate and mortgage rates, they do cause the market to react to fears of inflation. Lines of credit will be tighter than they have been. Property values are dropping, bringing equity in your home lower. And you might start to pay attention to all those credit card offers for a change instead of instantly shredding them. Card issuers will trend towards variable rates rather than offer a low, fixed rate term. Lock in a good deal while you can. Nobody can predict the future. We can make educated guesses, but realize that's all they are. Don't jump into a major financial decision based on what the Fed may do next. But don't be caught unaware either. 2nd Flash:
FREEDOM
FREEDOM: the quality or state of being free as a: the absence of necessity, coercion, or constraint in choice or action; b: liberation from slavery or restraint or from power of another; c: the quality or state of being exempt or released usually from something onerous. (Merriam-Webster's Online Dictionary) In 1776, thirteen colonies risked everything for the chance to build a new kind of nation. Representatives from each formed the Second Continental Congress, declaring independence from England. It was a bold statement, asserting man's right to be the master of his own destiny. Freedom means something different to each individual. The Native American Indians, who called this country home long before we did, certainly didn't find our forefathers to be a liberating force. The 24 victims of the Salem Witch Trials were not protected by religious freedom. Yet the quest continues. As Americans, we have the right to dream as big as we are able... and the opportunity to pursue that dream. Not so around the world, where even children are forced into servitude. Hundreds of thousands of children worldwide under the age of 18 have been recruited into government military service. Many are abducted at school, on the streets or even from their own homes and forced to serve in combat, as spies, messengers, servants, or lay and clear landmines. This is despite international law which prohibits the participation in armed conflict of children aged under 18. The Russian Federation and China have yet to incorporate the May 2000 Protocol into their national law. Human rights issues have been revealed that deny citizens their very health. From receiving health care to safe drinking water and adequate nutrition, there are governments that pick and choose who will live and who will die. The Zimbabwean government has suspended humanitarian efforts to distribute food to the needy of their country. Climate factors, HIV/AIDS pandemic and economic problems have all but brought the country's domestic food production to a halt, making the poor of the nation dependent on foreign goodwill. The government, by denying the efforts of non-governmental organizations, ensures their monopoly over food distribution. And the privilege of choosing where those precious commodities are distributed. The recent devastation caused by Cyclone Nargis in Myanmar brought that country's human rights violations to the headline news. The country officially reported nearly 23,000 dead from the horrific storm, but independent observers estimate the number may be closer to 100,000. More than a million people were left homeless without essential food, shelter or health care. Yet relief efforts were blocked. According to the Myanmar Ministry of Foreign Affairs, aid would be received and distributed "with its own resources." Rather than distribute the small amount of supplies that made it into the country, local authorities were selling it. Closer to home, I've heard tales first-hand from Cuban refugees who have been denied food, water and medical supplies. The Communist regime assigns where you will work and live, and dictates their daily rations. And to collect them, one must appear daily and wait in a long line. These types of situations are commonplace in developing nations. Lack of food has caused riots in Haiti, lack of medicines at the core of Africa's HIV/AIDS pandemic. Abusive governments block aid to those most in need to increase their own power. Citizens who speak out against a country's policies are imprisoned. July 4 is more than a day for parades, backyard barbecues and fireworks. It marks the birth of our great nation. Among the festivities in every state are naturalization ceremonies. Men and women from around the world still leave everything behind in pursuit of the liberties offered here in the United States of America. They know how special it is to live in a place that guarantees life, liberty and the pursuit of happiness. Let the rest of us learn from them and stop taking our freedoms for granted. Be thankful we live in the land of the free and the brave, and recognize all the effort it takes to sustain our liberties. Financial News
Well, the mixed bag of financial news has brought bond rates down and played heavily with the stock market. The world financial markets are very dependent on news, whether validated or not. The news media reported that Israel is likely to attack Iran, prompting oil prices to increase. Tuesday the U.S. State Department said that they did not have any information to support that claim. Nonetheless, oil prices closed at $141 a barrel. Auto sales in the U.S. dropped across the board, showing that consumers are reluctant to make large discretionary purchases. The 9.7 million autos were sold in June fell below the predicted number by 4%. A sign of the times is the announcement by Starbucks that it will be closing 600 stores and reducing the new stores to 200 in response to the weakening economy. For those high-end coffee drinkers, this will hurt almost as much as the oil prices! On the positive side, U.S. Manufacturing increased in June according to the Institute for Supply Management's factory index. The factor rose to 50.2, better than expected, from 49.6 in May. It was the first reading above 50, the point between expansion and contraction, since January. Construction spending decreased, but less than anticipated. This backhanded good news had a positive effect on the stock and bond markets. The Federal Reserve Open Market Committee met last week on Wednesday stamping a no-change on Federal rates, with a watch and wait approach. The commentary was a watch in inflation, with less concern for recession. Today's National Market Rates
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In This Issue... 1st Flash: WHAT IT MEANS TO YOU WHEN THE FED SAYS.... 2nd Flash: FREEDOM Today's Market Rates On the World Wide Web Tip of the Week Financial News Past issues of GCFlash: July 1, 2008 Edition #461 June 24, 2008 Edition #460 June 17, 2008 Edition #459 June 10, 2008 Edition #458 Looking for articles from a past issue of GCFlash not listed above? Find them in our Knowledge Base!
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