The Eurozone conducts its business under the European Central Bank (ECB) with headquarters in Frankfurt, Germany. The European Central Bank is headed by a President and a board consisting of all the heads of the national central banks of the respective countries part of the Eurozone. The board, under the headship of the president, performs all economic and monetary decisions while political decisions and fiscal policies are stated by the Euro Group. This elite group is comprised of all the finance ministers of the respect countries under discussion. These countries include Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

The Eurozone crisis is an issue which has been taking different forms in the previous years. Whether it may be member countries disobeying the set rules and obligations under which conditions the respective country was allowed to be represented as a Eurozone member state or the recession which has followed a single country’s economy going down but affecting the rest as well due to the shared currency, the crisis has been there from the beginning. Set criteria of having a budget deficit of 3.0 percent or less with respect to the national gross domestic product (GDP) of the country, a debt of maximum 60 percent of the GDP, low inflation and interest rate close to the European Union are some of the dominant ones.

The first two criterions, budget deficit limit and debt limits, were openly defied and it was uncovered in 2008 when Greece was found to have been flaunting the treaty openly with a tactical approach. Greece announced its deficit to be 12.7% of the national GDP. The same year, the European Union did its part of the math and announced the situation was worse than what Greece portrayed it as and hence new figures were releases. The deficit amount was counted to be 13.6% of the gross domestic product. This was around the time of the international economy recession.

In 2008, the European Union decided to launch a 200 billion euro project to save their economy after the international recession. Despite all measures taken to elevate the Eurozone economies, the European Union still had to impose restrictions on certain member states such as France, the Irish Republic, Spain and Greece to cut their budget deficit. It was in the December of this same year, the year 2009, when Greece finally announced and agreed that its debts have reached 300 billion Euros. This was about 113 percent of Greece’s gross domestic product and almost twice as much as what the European Union had lain down as the restriction to avoid such circumstances.

The start of 2010 was not all good for Greece, yet again. Budget deficits were an all time high and had jumped up to 12.7% instead of the 3.7% of its gross domestic product. Around the mid of the year, the European Union discovered notable record high borrowing costs. The reviewing of accounts showed 13.6% of its GDP, as mentioned above, was too much to handle for Greece under its conditions. Although the then Prime Minister did claim his country will not go default on debts, he was wrong. There was no condition or previous example as to throw out any country from the Eurozone. Henceforth, the European Union and the Eurozone had to get together to save Greece. To save itself, Greece passed certain austerities which launched riots on the streets of the Greek Gods’ land. Greece was then told to make further spending cuts and a promise was made to support the Greek economy. The European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) got together and formed bailout packages for the Greek. The troika decides to have a 22 billion Euros as safety money for the country, despite their President Papandreou announcing that Greece did not need bailout money.

Portugal, Spain, Ireland and Greece: these countries became the main concern of many in Europe as they were well settled but also heavily indebted countries. Still worst of all remained Greece. Although just a conjecture, rumor had it that Portugal would be next in line to Greece. This was no longer a financial or economical problem anymore and severe steps had to be taken as countries were threatened. Enter: Eurozone finance ministers’ get together and formation of the European Stability Mechanism. This bailout endowment was worth 500 billion Euros.

Not far from the announcement of the bailout package funds being allotted, Portugal raised both its arms and went to the European Union for support. Portugal realized it was unable to handle the crisis on its own and proved to be less stubborn than Greece. In May 2011, a month after Portugal requested support, Portugal was allotted a 78 billion Euros euro bail-out package. Greece proved stubborn enough that talks broke out about having to throw Greece out of the Eurozone. Greece was told to cut further its expenses before it could be allotted any further loan installments, without which the country could most probably default on its loans. As soon as the Greek government announces favour of further austerity measures, further 12 billion Euros are added Greece’s loan box.

Despite the troika’s initial decision as to offering no loans being given out to Greece, they end up lending more than a 100 billion Euros in loans. Soon enough, it is quite clear that the loan amounts are not sufficient and hence a second bailout package is prepared and Greece if given further 109 billion Euros. This bailout package could also be counted as a package to assist Greece in failing gracefully without hurting the other European economies in the Eurozone bloc.

At this stage when all seems to be gaining control, a few thunders are struck on the euro area economic world at almost the same time. Firstly, the EC President Jose Manuel Barros announces debts to be increasing rapidly and the chances of a sovereign crisis being walloped which would be out of the Eurozone bloc’s control. Secondly, yields on Italy’s and Spain’s government bonds rises bluntly while those of Germany’s fall gallantly. Germany’s investors look for huge returns as borrows and hence the bond yields were at a record low.

Conditions in Italy and Spain did not seem to be improving and hence by August, the European Central Bank announced it would buy out some of Italy and Spain’s government bonds in attempts to lowering the borrowing costs of both the countries. This measure seemed in evident as concerns regarding the larger economies of Italy and Spain itself were under danger. As a consequence to these events, Spain stepped up trying to improve its situations starting with an amendment in the constitution as to keep the budget deficit at a strictly limited amount for future references. They named it a ‘golden rule’. Before this, the Great-7 nations had announced to act in a coordinated manner to tackle the global crisis. As a measure to follow through with the latest amendments, Spain passes an austerity measures budget of 50 billion Euros after quite a quibble in the parliament. Major components of interest were made to rest aside and only necessities were wrought in order to save the budget and cure the deficit amount by the year 2013. This brought great unrest in the nation as people were obviously denied certain gratifications they were accustomed to.

By September 2011, the United States Treasure Secretary told the European Union to keep a firewall around their economic issues as to prevent the events from reaching other states as the Unites States itself. Later that month, a finance ministers meeting in Washington demanded more urgent steps be taken to prevent the issues from spreading any further like a wild fire. At this stage, Greece is the most instable European country left which with all the loans and bailout packages provided, still was unable to retain its economy. The US Foreign Secretary William Hague named the Eurozone as a ‘burning building without an exit’. The Euro Group members hold back decisions upon letting out the next instalment to Greece and hence European shares went lower and lower day by day.

Here, French President Nicholas Sarkozy makes an attempt to handle things and after a Great-20 Nations finance ministers meeting in Paris, France, President Sarkozy announces an intergovernmental treaty will be signed to push matters forward grounding the European nations to new budgetary rules and hence fighting the crisis. Measures remain unfinished and a treaty is not signed due to disagreement by the United Kingdom and Hungary. Greece is still at large and vulnerable, hence a threat to all the European Union. President Sarkozy announces a call off and delays the details of the treaty until March 2012.

On March 13^th 2012, the Eurozone finally launches another instalment to Greece worth of 130 billion Euros. IMF backs the Eurozone on this. This relief is not long lived, though. Within one month, Italy’s borrowing cost rises. This launches fresh doubts on the country’s ability to reduce and fight its debts. In an auction, Italy has to face an interest rate off 3.88% compared to the 2.77% it paid on similar bonds a month earlier. To top it all, Spanish borrowing cost roe to 6% next day to the Italian shocker. This rate was the highest Spain has seen in the past ten years!

Consequentially, Italy has to cut down its growth fund on 18^th April as the economy is now threatened to contract by almost 1.2% rather than the expected 0.4%. On 19^th April, Spain is relieved to some extent when at a bond auction, a rather hype is seen in the Spanish bond demand by investors, even though the borrowing cost did rise, nonetheless: the yield on the 10-year bonds rose to 5.743% from 5.403%, a difference of 0.34% as to the same kind of bonds sold in February.

The image used in this post is taken from Image: MR LIGHTMAN / FreeDigitalPhotos.net

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So why the talk about dragons all of a sudden? As you know, I have a bit of a soft spot for precious metals (especially gold and silver) and the 2012 silver lunar dragon coin caught my attention. Many dragon coins come out each year, but this coin especially caught my eye because the dragon was so happy and giddy with a big smile on his face. I simply couldn’t resist. As you can see in the photo, it can be considered “rough around the edges” with the scallop edge finish which adds to its numismatic value. The clouds and lotus flowers included in the coin design symbolize good fortune. The coin is certified to be 99.99% pure silver with a mintage of only 48,888 coins worldwide.

If you are investing in gold and silver then you’re probably buying for silver and gold value in the coin/bullion and not for numismatic purposes. I don’t generally buy for numismatic purposes either, but sometimes when you see a piece that really speaks to you, you can’t help but pick it up.

Since dragons are the considered the ultimate symbol of prosperity and luck, it might be time to re-evaluate our goals for this year. 2012 is almost half over already, have we stuck to our financial resolutions? It might be time to brush ourselves off and re-focus on our goal. Personally, I have felt I have veered off course a bit with everything going on, but it’s time to re-coup and get back to matters of personal finance. Those of you that may need some motivation or encouragement to do the same, just take a step back; sometimes we can be so preoccupied in getting through the next day that we can forget the goals we set for ourselves and therefore just end up staying in limbo. Time to get back to financial freedom!

To make sure you’re on the right track, take a look at your budget for the last month. Many of us have created budgets for ourselves and have fallen behind so time to take another look and re-adjust it accordingly so you can follow along in the future. Have you contributed to your retirement plan this month? If you are investing in a 401(k), are you remembering to put aside $416 each month so you can have $5000 set aside by the end of the tax year? What about your other investments? Many of us have real estate, commodities, stocks or bonds and it’s vitally important to keep up to date with everything you have and expand not only your investments, but your knowledge of investments. I personally have decided to re-read “The Creature from Jekyll Island” by Edward Griffin and I recently picked up “The Unfair Advantage” by Robert Kiyosaki so I’ll try to stay on track myself.

Even with all the crises happening on a global scale, try and follow along as much as you can so you can protect yourself and your family in the future. Multiple people have made predictions about what is going to happen in the year of the dragon which include Europe collapsing due to the current Eurozone crisis which is expanding rapidly across many countries etc. What do I think is going to happen? Nothing too good, the dow has fallen considerably, the prices of gold and silver have been manipulated, the dollar bubble is bound to pop soon causing either a recession or even a depression due to all the inflation we might even see a hyperinflation like in Zimbabwe. The rich and powerful are selling their homes, moving to remote areas of the world with plenty of food, water and silver supplies since the currency is becoming worth less and less. The price of oil and gas continues to increase so I believe people will begin to move towards a new source of energy (if you haven’t looked into investing in solar power companies, now might be an excellent time to do so). But again, nobody knows what’s going to happen for sure. The year of the dragon can hold many surprises for all of us.

It is very possible that a difficult period will come (to put it lightly) before things get better, so it’s time to prepare for it before it’s too late. Grab that extra food next time you go shopping, pick up some blankets, heat distributors, plenty of water and above all, hold investments which are actually worth something. Keeping cash is not the best idea right now; if you have extra money, hold it in precious metals, land, oil, real estate. These investments will never go to zero because of the actual value they hold. If you rely on paper currency you might find that the money is worth as much as the paper it’s printed on (I personally have a 100 trillion bank note from Zimbabwe to remind myself of what could possibly be coming).

The year of the dragon (just like dragon individuals) will come into our lives and create change. We need to learn to pick ourselves up, re-focus on our goals and adapt to what we now have. Soon the dragon will leave our lives and we’ll be the ones with the goofy-looking smiles.

The image in this post is taken from http://www.darcyshobbyshop.com

It’s been a rough 5 years for the U.S. economy. Since the housing market crash that triggered the Great Recession, it’s been consecutive years of unemployment, weak housing data, growing health care costs and more budget cuts. You’d think a clearer picture of the direction the country is taking would have become evident by now, but it hasn’t. Things can easily start improving tomorrow or continue getting worse by the minute. Since we are all invested in the long term health of the U.S. economy, it’s important to know how to examine the facts and look past analyst recommendations. After all, real estate professionals have been calling a housing bottom for the past 3 years, and investors have been saying stocks would come crashing down any minute now due to fundamentals. Throw in the “promises of success” inherent in any election year and you’ll realize that no one really has any clue which way the economy will go. So examine the facts yourself and make up your own mind as to whether you’re a bull or bear.

Let’s analyze the major sectors of the economy to see if any trends will present themselves to give us a more clear indication of the future.

Housing

The housing slump has been in full effect since 2007, with many areas seeing price decreases of upwards of 60% since the peak. Experts refer to these staggering figures as “post-bubble lows,” citing the steep discounts you can now get in some areas of the country. For example, many areas of Riverside, California are now in a price range that is 2-3x average household incomes for the city, a historically safe ratio for buying. And yet despite this, the area continues to suffer due to a lack of jobs and high gas prices that would-be commuters from Riverside have to consider. Other cities like Las Vegas and Detroit have seen home prices plummet, but a weak job market all but ensures prices will go down.

All this would make it all but certain homes are a bad investment, but then you have the outliers. In recent months, bidding wars have become furious in some local housing markets. Some experts are speculating that banks are only slowly releasing their supply of shadow inventory, homes that are being held in bank possession but are neither for sale nor for rent. The result is that there are fewer homes on the market, creating an artificial demand and what some are calling a mini-housing bubble. Home prices have actually gone up in those areas as of the latest housing data, but whether or not this is a trend remains to be seen.

Stocks

The Dow Jones fell to about 6,600 in early 2009, down sharply since its record high of over 14,000 points in late 2008. To see such a drop was disastrous for the local and global economy. The government quickly intervened, bailing out banks and offering support to various sectors of the economy. To date, the Dow has recovered to about the 13,000 level, but many are wondering whether the economy is in any better shape today than it was in 2009.

It used to be that regardless of the ups and downs of the stock market, buy and hold was a safe bet. As long as you kept dollar cost averaging up or down, you were okay in the long run. Now however, recent studies have shown that even that concept can be extremely flawed, especially for baby boomers who were hit hardest by the Great Recession. Some conspiracy theorists are claiming that the current stock market levels are due to manipulation and pumping behind the scenes by the government. But if you bought into that scenario, you would have missed a great run-up since 2009’s low below 7,000. Of course being an election year, stocks generally tend to perform better historically.

It is impossible to time the market, but you’re going to have to make the best guess on when to get out and be defensive or jump in feet first. Just make sure you plan accordingly are comfortable with whatever you invest.

Unemployment

The labor market has seen great improvements since the regular monthly unemployment claims of 400,000+ have dropped. But all data can be subject to manipulation, making it difficult to know where the job market is really headed. For example, a website called shadowstats.com tracks what it calls the true unemployment picture for the country, using accounting metrics that it claims is more accurate than what is being reported by the government. According to the site, true unemployment including those who have completely given up looking for work and those underemployed, is around 20% vs. the 11% being reported today.

Because the methodology used to calculate unemployment numbers have changed throughout the years, it’s hard to know who’s telling the truth. A good place to start would be the number of unemployment numbers for fresh college grads, which currently stands near 50%. Such a high number is indicative of the hiring environment all grads are currently facing, but it doesn’t take into account the number of graduates who are working part time or in fields that don’t require a college degree. The numbers then, can be much worse or much better depending on who you believe.

Government Debt

The current U.S. national debt is at $15.7 trillion dollars according to usdebtclock.org. That’s bad, but it’s still conceivable that the country can repay its debt given a long enough timeline and stricter cost-cutting measures now. The real hardship facing the country is whether or not investors will continue to buy treasuries or government bonds, keeping the country afloat. Recently, the U.S. lost its triple A debt rating, signaling to investors that it may not be good for the checks it writes. That’s hardly a strong indication of America’s future.

But despite the large amount of debt piling on by the second, the U.S. still remains the world’s reserve currency and is still better off than many other countries. Europe continues to struggle with a weak union and China has been weakening its currency for years, increasing exports and economic activity. In fact, the U.S. is China’s number one customer, so where we go, they go. The reality is that the world economies seem to be racing to the bottom, unwinding debt and deleveraging to see who can survive each additional economic stress event. If the U.S. economy truly ever falls however, the world is likely to go down with it.

Bull or Bear?

Those are the facts, but it’s up to you to put your money where you think it will grow. Or, you might be thinking capital preservation is more important than growth at this point, which is a realistic and fair assessment. The bad news is that no one really knows whether the U.S. economy can make it out of the Great Recession. The good news is that you still have time to be defensive or allocate your money where it makes the most sense for you.

The images used in this post are taken from Image: Victor Habbick / FreeDigitalPhotos.net and Image: Jeff Ratcliff / FreeDigitalPhotos.net

The first basic that you need to cover in order to figure out whether or not you should refinance a mortgage is what conditions make refinancing a good idea. One of the best times to refinance a mortgage is when interest rates fall. This refinancing will mean that you will have to make smaller payments to your bank. The idea is that if you purchased a house on loan a few years back and the interest rate was supposedly 6.2 %. Then as the interest rates fall, suppose that the new rate is 5.2 %. After the refinancing of the mortgage you will be charged as per the current interest rate which is lower than the interest rate when you bought the house. This will definitely ease the burden on your pocket.

Some people initially take out an adjustable rate mortgage. This means that as the market interest rates change, the interest rate applicable to the mortgage also changes. So when the interest rate rises you may have to pay more and then when it falls your monthly payment may fall too. This causes a certain degree of uncertainty and the idea that your payment could rise due to higher interest rates is intimidating. In order to overcome this, you may refinance your mortgage and change it to a fixed rate. As a result, the interest rate remains fixed at what is the prevailing rate when the mortgage is refinanced.

Or you can stick to your adjustable rate mortgage but simply get a mortgage at terms that suit you more  by refinancing your mortgage. You can refinance the mortgage at a smaller interest rate or a lower payment cap, which means interest rate must always be below a certain level.

If you are looking to alter the length of your mortgage then you should consider a refinance too. For example, imagine a scenario where you cannot pay the amount you had initially intended to pay every month. What you can do is refinance your mortgage and this time increase the mortgage’s term. An increased term means smaller monthly payments. However there is a downside to it too. A longer term will mean that you will have to pay off your mortgage for a much longer time span and may eventually end up paying more than the cumulative sum you had initially intended before the refinance.

Alternatively, you can decrease the length of your mortgage because not only will this lead to higher interest rates but it also means that you will get rid of your mortgage sooner. You pay a higher amount each month but at a lower interest rate and end up paying back all your mortgage sooner than you had planned. Of course this is not an option if you are having trouble meeting monthly payments as it simply adds to your current burden but brings long term benefits. But if you are nearing retirement then this may seem like a good idea, because you can enjoy your retirement free from a mortgage.

All this said and done, a refinance may not always be a good idea. There may be instances where a refinance may simply worsen your financial situation.

For those who get intimidated by finance related details, an amortization chart may be scary and hard to understand. But the basic idea is that as your mortgage grows older and older, more of the monthly installment that you pay will go towards building equity instead of paying interest. However if you refinance a mortgage at a later point in the mortgage’s life, then this means your amortization process will start all over. Your monthly payment will once again start going more towards payment of interest and less towards building equity.

Furthermore, you will need to calculate the extra interest that you will be paying if you increase the term of your mortgage. The calculations are simple. You simply need to calculate the interest that you will pay as per your current mortgage from the current month till the end of the mortgage. Then you need to calculate that with a longer term at a lower interest rate, how much interest will you pay till your mortgage ends. If the latter is larger than the former, then it’s a better idea to continue with your current mortgage. This additional interest is basically one of the hidden costs of refinancing your mortgage. There may be other hidden costs too depending on your particular terms and other factors, which need to be taken into account. It is important to know that you are not paying more after your refinance than you were before it.

The final point you need to go over is that once you go through with the refinance, how long will it be till you start saving. This calculation too is not too complicated. Simply calculate initially the money you will save on a monthly basis once your mortgage is refinanced. Then find out all the costs of refinancing, hidden and visible. You will need to factor in other things such as tax payments when coming to a breakeven point, but if this complicated then simply stick to the two earlier calculations. You now know the number of months until you reach breakeven point and from here on you will start saving money.  You are now officially ready to arrive at the decision as to whether or not refinancing your mortgage would be a good idea for you.

Refinancing a mortgage is nowhere as difficult or complex as most people fear. In fact once you grasp the basics of it, whether or not you want to follow through with the decision to refinance will be really easy for you to decide once you have all the required information. Remember to consider your circumstances, and if refinancing will be a good idea in the given circumstances and then finally the hidden costs you may incur and your breakeven point. After this are ready to form a decision regarding refinancing your mortgage. The decision should only be taken after you are well aware of the basics of refinancing a mortgage and its pros and cons in your situation. A well though out decision can lead to you saving a lot of money, but a decision made in haste can end up in disaster too. The key is to be relaxed and make a calm, informed decision.

The image used in this post is taken from Image: renjith krishnan / FreeDigitalPhotos.net

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Get A Lawyer

Did you know that if you tell your debt collectors that all of your debt is being handled by your lawyer, they are legally required to contact your lawyer instead of you? Tell your debt collectors that you have a lawyer and that your lawyer is handling your debt. Should they call you, send you letters or otherwise harass you afterwards, you can ask your lawyer to prosecute them to the full extent of the law.

Partial Payments

You can sit down with your debt collectors and work out a settlement with them so that you can pay partial payments. While this doesn’t make your debt go away and it won’t really make either party happy, it will give you a way to pay off some of your debt, albeit more slowly.

Negotiate Your Debt

Did you know that you can usually negotiate your debt with your debtors? If you owe an outstanding debt to someone (or someone’s) and cannot pay it off then you should invite them to a meeting. Explain how your situation might require filing bankruptcy if you cannot work out another way to pay. Usually you should be able to negotiate a settlement that includes debt reduction and smaller bills. Most debt collectors would rather receive some of the money you owe them then none of it at all.

Cease And Desist Letter

Another great way to get your creditors to stop hassling you is to send them a letter of cease and desist. Did you know that if you write a letter (it must be a letter not a fax or email or phone call) telling your debtors that they must either stop calling your or relinquish the debts that you owe them, they are legally required to stop. Write the letter and be polite, send it through registered mail and ask that the receiver give their signature upon the arrival of the letter. You should then keep a copy of the letter and a receipt of the letter being sent. After receiving the letter of cease and desist, the debt collector may not contact you except to acknowledge receiving the letter and to inform you of any legal court action they are taking against you.

While sending a letter of cease and desist does prevent the debt collector from contacting you directly, they can still hire someone to contact you for them. Should this happen; you should simply send the new person a letter of cease and desist.

Filing For Bankruptcy

In worst case scenario, you can file for bankruptcy to protect yourself from your creditors. A debtor can chose to file either chapter 7 or chapter 11 bankruptcy for their business. Chapter 7 bankruptcy involves liquidating all of your assets (selling your professional property) and using the money to pay your creditors. This is the fastest and least expensive method of filing for bankruptcy. However; with chapter 7 bankruptcy, you will lose all of your assets. The second method of filing for bankruptcy is chapter 11 bankruptcy. Chapter 11 allows you to freeze your debts so that you have more time to pay them off without giving up your business. This form of bankruptcy is the most effective if you want to keep your business even though you cannot pay off your debts. A recent example of a large company that filed for chapter 11 bankruptcy is GM motors who are now doing business and out of bankruptcy.

A Few Things To Remember

If your creditors or debt collectors are hassling you then you can report them to your states attorney general. You can also prosecute your debtors should they contact your after 9 PM or before 8 AM. Remember that the best way to work out a debt solution is to communicate. You don’t have to live with being hassled by your creditors but you shouldn’t avoid them either.

Guest post by Chris Keenan. Chris is a writer for a nj bankruptcy attorney and regularly writes about personal finance matters.

Image Credit: Sunface13 via Flicker Creative Commons License

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