The Secrets of Money
and How You Can Benefit from Them
By Eric Hammer
When times are tough, it seems that everyone is looking for
the secrets of money - how to make it, how to save it, how to
get more of it. While an entire book could easily be written
on the subject of secrets of money, we will instead focus here
on why things have been so volatile in world markets as of late
and how you can profit from it.
What Caused the Initial Problems
The initial problems, from back in 2008 started with a housing
crisis in the United States. The crisis was rather complicated
in that it wasn't a simple case of bad housing loans. In essence,
the crisis happened because the people on Wall Street assumed
they understood fully the so called secrets of money.
Loan officers were offered commissions for every loan they
originated meaning that there was tremendous pressure on them
to continue to approve new loans, even to people who clearly
couldn't pay them back. In turn, the bankers were able to sell
these loans to Wall Street investors in packages of commodities.
The idea was that by packaging them together, the risk of any
one loan defaulting would be minimized. Investment banks such
as Lehman Brothers in turn would offer loans to investors who
would buy these securities.
It all seemed to be working splendidly until, as inevitably
happens, the bubble burst because prices had gone too high and
people were no longer able to pay back the loans they'd taken
out. However, because the loans were no longer owned by individuals,
it was difficult to arrange modifications which would allow for
the borrowers to pay back the loans rather than default. This
led to a domino effect whereby the economy began to contract
and jobs were lost.
The Current Problems
Another one of those secrets of money involves national debt,
as in the debt of the United States of America as well as that
of other countries like Greece and Spain. This debt has been
the latest harbinger of problems in the world as one country
after another teeters on the brink of bankruptcy. In essence,
nations borrow money when they don't have enough money coming
in from their tax receipts. However, when the amount of money
these nations have borrowed ends up being too great an amount,
lenders get nervous about the possibility of a default (in much
the same way that you may have trouble getting credit if you
overdo it on borrowing money).
What has happened is that many countries, most notably Greece,
over-borrowed money from various lenders and have found themselves
in dire straits now. Rating agencies such as Standard and Poors
and Moody's Investments have suggested that a default of Greek
debt is inevitable because the Greeks are no longer able to borrow
at a rate which allows them to continue to pay back loans. The
European Union as a whole has been working on a plan to rescue
Greece because they are part of the Euro Zone. The theory is
that if a member of the Euro Zone were to default completely
it could make the Euro much less valuable and destabilize the
entire union.
How You Can Benefit
Those who understand the secrets of money can benefit from
these problems by carefully navigating the waters of various
national debts and even banking. The recent devaluation of American
debt by Standard and Poors for example has had the effect of
causing the stock market to go down. Those who short sold stocks
heavily dependent on the United States would have made money.
In addition, those who bet on the American dollar against other
currencies in the Forex markets would have made money as well
since one of the theories regarding the so called secrets of
money is that when stocks go down, the value of the dollar goes
up (this did indeed happen with a number of foreign currencies).
Bottom Line
Understanding the secrets of money is difficult and complicated.
However, those who pay attention to the financial markets and
take the time to understand why things work the way they work
will benefit handsomely and ultimately find that they are able
to increase the size of their portfolios.
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