Banking Explained Money and Credit

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Banking Explained Money and Credit
The international banking system is an enigma. There are more than 30.000 different banks world wide, and they hold unbelievable amounts of assets. The top 10 banks alone account for roughly 25 trillion US-Dollars. Today, banking can seem very complex, but originally, the idea was to make life simpler. 11th century Italy was the centre of European trading. Merchants from all over the continent met to trade their goods, but there was one problem: too many currencies in circulation.

In Pisa, merchants had to deal with seven different types of coins and had to exchange their money constantly. This exchange business, which commonly took place outdoors benches, is where we get the word "bank" from; from the word "banco", Italian for "bench". The dangers of travelling, counterfeit money and the difficulty of getting a loan got people thinking. It was time for a new business model: home brokers started to give credit to businessmen, while genevese merchants developed cashless payments.

Networks of banks spread all over Europe, handing out credit even to the church, or European kings. What about today ? In a nutshell, banks are in the risk management business. This is a simplified version of the way it works. People keep their money in banks and receive a small amout of interest. The bank takes this money, and lends it out at much higher interest rates. It's a calculated risk, because some of the lenders will default on their credit.

This process is essential for our economic system, because it provides ressources for people to buy things like houses, or for industries to expand their businesses and grow. So banks take funds that are unused by savers, and turn them into funds society can use to do stuff. Other sources of income for banks include accepting saving deposits, the credit card business, buying and selling currencies, custodian business and cash management services. The main problem with banks nowadays is, that a lot of them have abandoned their traditional role as providers of long-time financial products, in favour of short-time gains that carry much higher risks.

During the financial boom, most major banks adopted financial constructs that were barely comprehensable and did their own trading in habit to make fast money, and earn their executives and traders millions in bonuses. This was nothing short of gambling and damaged whole economies and societies. Like back in 2008, when banks like Leeman Brothers gave credit to basically anyone who wanted to buy a house, and thereby put the bank in an extremely dangerous risk position. This led to the collapse of the housing market in the US and parts of Europe, causing stock prices to plummet, which eventually led to a global banking crisis, and one of the largest financial crises in history.

Hundreds of billions of dollars just evaporated. Millions of people lost their jobs and lots of money. Most of the world's major banks had to pay billions in fines and bankers became some of the least trusted professionals. The US government and the European Union had to put together huge bailout packages to purchase bad assets and stop the banks from going bankrupt. New regulations were put into force to govern the banking business, compulsary bank emergency funds were enforced to absorb shocks in the event of another financial crisis. But other pieces of tough new legislation were successfully blocked by the banking lobby

Today, other models of providing financing are gaining ground fast. Like new investment banks, that charge a yearly fee and do not get commissions on sales, thus providing the motivation to act in the motivation in the best interests of their clients. or credit unions - cooperative initiatives that were established in the 19th century to circumvent credit sharks. In a nutshell, they provide the same financial services as banks, but focus on shared value rather than profit maximisation. The self proclaimed goal is to help members create opportunities like starting small businesses, expanding farms or building family homes while investing back into communities.

They are controlled by their members, who also elect the board of directors democratically. World wide, credit union systems vary significantly, ranging from a handfull of members to organisations with several billion US-Dollars and hundreds of thousands of members. The focus on benefits for their members impacts the risk credit unions are willing to take, which explains why credit unions, although also hurting, survived the last financial crisis way better than traditional banks. Not to forget the explosion of crowdfunding in recent years. Aside from making awesome video games possible, platforms arosed that enabled people to get loans from large groups of small investors, circumventing the bank as a middle man.

But it also works for industry - lots of new technology companies started out on kickstarter or indiegogo. The funding individual gets the satisfaction of being part of a bigger thing, and can invest in ideas they believe in. While spreading the risk so widely, that, if the project fails, the damage is limited. And last but not least, micro credits. Lots of very small loans, mostly handed out in developping countries that help people escape poverty. People who were previously unable to get access to the money they needed to start a business, because they weren't deemed worth the time.

Nowadays, the granting of micro-credits has evolved into a multi-billion dollar business. So, banking might not be up your street, but the banks' role of providing funds to people and businesses is crucial for our society and has to be done. Who will do it and how it will be done in the future is up for us to decide, though.

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Annuities Meaning
selling annuity
structured settlements annuities

Purpose of an Annuity
An annuity provides income for a specific number of years or for life. An annuity protects a person against outliving their money. Annuities are not life insurance, but a way of accumulating money and liquidating an estate.

Annuity Owner
Annuity owner is the purchaser of the annuity.

Annuitant
Annuitant is the person who receives the payments from the annuity.

Accumulation Period
Accumulation Period, also known as the pay-in period, is the period of time over which the annuitant makes premium payments into the annuity. It is also the time that the premium payments earn interest on a tax deferred basis. Annuity Period, also known as the annuitization period or liquidation period, is the time during which the money that has accumulated during the accumulation period is converted into income payments to the annuitant.
Note: If an annuitant dies during the accumulation period, the beneficiary will receive the cash value or total premiums paid whichever is greater.

Annuity Funding
There are twoways to fund an annuity:
A single payment (lump sum) Periodic payments, in which premiums are paid in installments over a period of time.
Annuities can also be classified according to when income payments from the annuity begin.

Immediate Annuity
An immediate annuity is one that is purchased with a single lump sum payment and provides income payments that start within one year from the date of purchase.

Deferred Annuity
A deferred annuity is an annuity in which the income payments begin sometime after the first year. Deferred annuities can be funded either with a single lump sum or through periodic payments.

Annuity Payout Options
Annuity payout options specify how annuity funds are to be paid out. They are very similar to the structured settlements annuities options used in life insurance and determine how the policy proceeds are distributed to the beneficiaries.

Straight Life Income Option
The Straight Life Payout Option, also known as Pure Life, will pay a specific amount for the remainder of the annuitant's life. This option provides highest monthly benefit for an individual annuity. Although the annuity payments are guaranteed for the lifetime of the annuitant there is no guarantee that all the proceeds will be full fully paid out, because the payments stop after the annuitant's death.

Life With Period Certain
Life with Period Certain is anotherr annuity payout that is contingent on the annuitant dying. Under this option the annuity payments are guaranteed for the entire lifetime of the annuitant and for a specified period of time to the beneficiary.

Fixed Annuities
Fixed Annuities provide a fixed guaranteed payout. Payments that do not vary from one payment to another and guaranteed minimum rate of interest.

Variable Annuities
A variable annuity serves as a hedge against inflation, and is variable because there is not a guarantee of payout. Payments can vary from one payment to another, and there is not a set rate of interest. A variable annuity is considered a security and is regulated by the Securities and Exchange Commission (SEC). An agent selling annuity must also have a securities license in addition to their Life Insurance License.

Accumulation Units
As variable annuity premiums are invested and begin to grow this is known as the accumulation of units.

Annuity Units
Annuity units is the payout phase of the Variable Annuity.

Variable Annuities
A variable annuity is considered a security and is regulated by the Securities and Exchange Commission (SEC). An agent selling annuity must also have a securities license in addition to their Life Insurance License.

Accumulation Units
As variable annuity premmiums are invested and begin to grow this is known as the accumulation of units.

Annuity Taxes
A portion of each annuity benefit payment is taxable and a portion is not. The portion that is nontaxable is the anticipated return of the principal paid in. This is known as the Cost Base. The portion that is taxable is the interest earned on the principal. This is known as the Tax Base.



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Best Survival Knives
CRKT Sketch Folder
The Sketch is a great example of what makes an excellent EDC knife. Simple, understated, and it just plain works. It has a blade length barely under 3 inches and stretches to a little over 6.5 inches when open. A frame lock keeps the blade secure while you work, and the 8Cr14MoV steel will keep a sharp edge. A thumb hole at the spine provides one-handed opening capability. The K-tip blade profile is very handy, especially when fine detail work is needed.

TOPS Knives XXX Dicer
Combine a wide spatula with a chef’s knife and you’re on the right track for the XXX Dicer. Part of the growing kitchen collection from TOPS Knives, it measures 8.88 inches from tip to butt, with the blade stretching 7 inches of that length. The handle is red and black G-10, providing a positive grip no matter what you’re slicing. The 440C steel blade will stand up to years of use, whether you’re in the kitchen or the backcountry.

TOPS Knives Street Spike
The Street Spike is simplicity itself. Start with a slab of quarter-inch 1095 steel and skeletonize the handle to reduce the weight. Radius the handle edges for comfort so you don’t need to add scales and you’re good to go. It's easy to carry, easy to conceal and easy to use for a wide range of tasks. Even with the Kydex sheath, it is small enough to fit into a pocket or on a neck chain. The plan was to create a no-frills tool that is easy to keep on your body and TOPS succeeded on both counts.

Spyderco Astute Folder
The Astute is a folder that punches way above its weight class. It has a four-position pocket clip as well as a lanyard hole, allowing a wide range of carry options. The blade is 8Cr13MoV steel, and it has a gently curving flat grind edge. A liner lock keeps you safe while you work and the textured G-10 scales keep the knife in your hand, even in cold or wet conditions. All in all, the Astute provides all the quality Spyderco is known for and at a value price point.

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