As Americans spend billions on holiday shopping this month, online security experts say a little caution can go a long way when it comes to avoiding identity theft.
“In general online shopping is good. It’s safe for the most part, but it’s the safest when you initiate the contact, when you log onto a known website,” said Rick Avery, president of Boston-based Securitas Security Systems.
Directly visiting trusted, reputable online retailers is just one way to attempt to avoid the cyber criminals who try to steal sensitive information from vulnerable computers and unsuspecting consumers.
“There is a risk in commerce …” said Sam Ransbotham, an information systems professor at Boston College. “There is also a risk from walking around with a wad of cash. We’ve got years and years of experience walking around with wads of cash that we just don’t have with these newer mechanisms.”
Purchases at brick-and-mortar stores aren’t immune to data breaches either. Last year, hackers stole data from 40 million credit cards from Target, while cyber thieves got information from 56 million credit cards from Home Depot earlier this year.
To reduce the chances of fraud, Avery advises that shoppers be wary of offers sent via email. Criminals, he said, may send legitimate-looking emails that appear to be from online merchants or banks. Rather than clicking on a link in an email, he recommends directly typing the website address into your browser.
“One of the most dangerous ways people get involved with credit card fraud or theft on the Internet is they get emailed a link offering 50 percent off, or saying it’s from the bank, and it’s actually a false website made to look like the authentic website,” he said.
Cyber criminals can use fraudulent websites to gather financial information from a person or install malware on their computers.
“If you’re shopping around and find an extra, extra really good deal, that might be the online equivalent to buying cheap speakers out of the back of a truck,” Ransbotham said. “If it’s too good to be true, it is.”
Avery also recommends using credit cards or one-time use credit cards instead of debit cards.
“Some banks have protections on a debit card, but not all do at the point of an ATM,” Avery said. “Usually, your debit card is tied to your other banking accounts, and it’s a lot more difficult to get your money back. It may be weeks before you get your money back.”
In some cases, a victim might never get that money back.
We’re all taught that it’s good to save some for a rainy day but simply setting a side a portion of our income is not going to cut it nowadays, what with the inflation always rising.
According to a senior investment expert of Corliss Online Financial Mag, most people feel intimidated at first of the idea of investing but it’s not really as daunting as they imagined. Though that’s naturally biased coming from a pro, we’re fortunate enough that he shared a few choiced investment tips meant for first-time investors:
It’s not just for the rich. You don’t need to have thousands of cash first before you can start dabbling in the stock market. All you need is the courage to endure the rise and fall of your savings. Keep in mind that investing is not something that quickly pays off. It requires time and patience so you have to be really committed in the idea that the money you set aside must be left to grow.
Find an adviser. Seeking the advice of someone who’s well-versed in his area of expertise is always a smart move. An investment advisor or a stock broker navigates the ins and outs of investment on a regular basis so partnering with one can help you greatly.
Getting this choice right will make a big difference on what kinds of investments you can access, how much commission fees you need to pay and a ballpark figure of the eventual payout you’ll get. Be wary of brokers who are not willing to go down to your level and teach you the basics as they might take advantage of your ignorance.
Stick with the basics first. Before you engage in volatile stocks that tend to move drastically, it’d be better to start with the staple ones to get a feel of things. It’s not wise to enter the stock market with a get-rich-quick mindset so test your patience with stocks that you can hold on a long-term basis and with minimal risk.
Consumer stocks like those in the medical, apparel or food industry are considered relatively safe because no matter the circumstance, people will always need those commodities. Just don’t expect very high returns soon.
Place your eggs in multiple baskets. Diversification is a common tactic in investing as mentioned by Corliss Online Financial Mag, mainly as a means of insurance against unexpected events. So in case that one of your investments drastically fell, you won’t lose everything.
Start investing now. The world of investing might be a little daunting for a first-timer but you have to start somewhere, right? Armed with a basic knowledge of the whole thing and a reliable broker, you might realize it is worth your time after all and prevent the common pitfalls beginners often make.
The soonest time is now so never mind that you’re still young — in fact, you’re in the best position to invest. Just set aside a fixed amount that you can realistically do without and it can give you returns in the years to come. The earlier you start the more money you can end up with.
Financial Tips Corliss Group online magazine: Put Yourself in Potential Investors’ Shoes with These 4 Tips
When it comes to securing investment, the overwhelming challenge for most entrepreneurs comes from trying to determine how to make a convincing pitch. Fortunately, it does not have to be that difficult.
As an entrepreneur and MBA who was schooled in traditional investment raising, I have always been told that to find investment capital for your business, you needed a comprehensive business plan, detailing (among other things) S.W.O.T. (strengths, weaknesses, opportunities and threats), operations and marketing plans, and financial models showing projections, cash flow, return on investment, risk analysis, etc.
These days, I am working on a new startup idea with Startup.SC, a South Carolina startup business incubator that focuses on scalable technology companies. What I have learned over the past few weeks is that although there is no exact formula for successfully developing a pitch, start by asking yourself this simple question:
If you were an investor, what would you want to see in a pitch?
Quite simply, put yourself in the shoes of the investors you are pitching and focus on these things:
1. Customer acquisition, not revenue.
More than revenue projections, investors want to know how you are going to capture and retain customers. In a roundabout way, it is essentially the same thing (both deal with revenue), but while revenue projections can be formulaic and are for the most part completely pulled from the air, what speaks to investors is a clear, effective and executable plan for capturing customers and keeping them.
2. The jockey, not the horse.
Investors bet on jockeys, not horses. What investors want to see is that you are committed and able to fulfill the task of implementing your plan through challenges as well as successes, and that you are the type of person who is going to see it through to the end. Ultimately, a great idea is worthless without great execution. Prove that you are the person to carry out the vision.
3. Flexibility, not recipes.
You may have an idea of how you want to structure your company and your investments, but understand that every investor has different expectations, as do their partners and stakeholders.
4. Remember: Nobody wants to see you fail.
When negotiating with investors, entrepreneurs often get stuck in the wicked mind game of trying to determine who is making out the best. In reality, success depends mutually on two things: your passion and capabilities and your investors’ money.
In the end, everyone loses if you fail, so it is in nobody’s best interest to create a situation that erodes any chance of success.
As I get rolling on a new startup with my partners at Startup.SC, a startup incubator in South Carolina, I am reminded of a few painful mistakes many entrepreneurs, myself included, make when starting a business.
Now, if you are starting a business, you probably have not put too much thought into how you are going to exit. There are, after all, countless considerations to make as you get started, from applying for business licenses, developing working prototypes to setting up your website. If you ever plan to sell your business or bring on investors to grow, how you run your business from the start is just as important.
Fortunately, it is not difficult to get started properly. Simply consider these four tips, often overlooked by most startup entrepreneurs.
1. Prepare your general ledger.
Setting up your accounting books may seem bland and tedious, especially for entrepreneurs without experience. Many rely on off-the-shelf accounting software, which provides general guidelines and templates to get you started. These are fine and completely acceptable for most startups, but to fully understand the financials of your company and, in the future, provide the evidence of the value you have built, you should give your set up careful consideration. Although a little pricey, it would benefit you to hire a professional when getting started.
2. Keep business business.
It is completely acceptable for entrepreneurs to pay for a variety of expenses with company funds, so long as those expenses meet the generally acceptable accounting standards (GAAP) for business expenses. Too many entrepreneurs, however, use company funds for personal use, trying to justify it with very liberal interpretations of GAAP or simply improperly reporting.
Not only could this get you in hot water with the IRS and open you up to a great deal of liability, it will be difficult in the future to separate these expenses when valuing your company. From the onset, it is best to just keep all personal expenses out of the business.
3. Report all revenues.
It is not difficult, and definitely enticing, to skim money from the business at the start, especially if you do most of your business in cash. Again, not only could this ultimately get you in trouble with the IRS, but it undervalues your business in the long run. It is going to be difficult to prove value and growth if you are not reporting real numbers from your business.
4. Keep careful records and receipts.
OK, excluding personal expenses and reporting all of your revenue just means giving more of your hard-earned money to Uncle Sam in terms of taxes. Not necessarily true. If you understand the extent of what you can expense and, more importantly, you keep copious records of your activity (both for audits and due diligence of potential buyers and investors), you can ultimately work down your taxable income without hurting the value of your company.
Grab yourself a good book or, better yet, find yourself a trusted professional advisor to learn how to best run your business this way.
I was part of a business team that looked at investing in businesses a number of years ago. It was not uncommon to meet an entrepreneur of a small business whose only proof of success and value was a shoebox full of cash. A few would emphasize that the company was paying for personal utilities, auto expenses and even groceries and that we should consider these expenses as part of the value.
The problem was that they often could not prove these claims satisfactorily because they had not accounted for them properly. In the end, it hurt the valuation of their company and gave us tremendous leverage during the negotiations.
Most entrepreneurs are not thinking about an exit when they are in the startup stages of a business. If you ever have a goal to divest or grow through investment, how you run your business before you start is just as important as after.
Is there anything that big government does well? I mean sure, our military is really pretty practiced at breaking things and shooting people; which (I guess) explains why they are being sent to fight Ebola. (If that logic escapes you, don’t worry… I think a lot of us feel that way.) And yeah, the IRS is pretty good at separating me from my hard-earned money; but, then again, so is Banana Republic. At least Banana Republic has the good taste to compete for my cash.
This basic question (“What does big government do well”) seems to confound liberals. We on the right have been asking it for decades… And we still haven’t been able to solicit a single honest answer from defenders of of the state. In fact, satire, sarcasm, and a little incredulity, is the general response from our esteemed colleagues on the other side of the ideological divide. I did, however, receive a list of “ten things government does well” from someone over the weekend. Of course, I couldn’t help but share it (and a few observations of my own) with the rest of the world:
Things that Government does well
(According to someone who I assume is a card-carrying member of Obama & Company):
1. Protecting our freedom
So that little dust-up in the 1770s was because government was just protecting our freedoms too vigorously?
2. Giving away land to common people
Um… What property are we talking about here? Because as far as I know, the government isn’t actually a “producer” of land – which tells me that the land it gives away to “common people” was first confiscated from someone else… Sure, government has turned “redistribution” into an art form, but I don’t think the forcible confiscation and redistribution of land coexists real well with “number one” on this list.
3. Educating everyone
The national graduation rate is a mere 75 percent; and only half of U.S. adults can name all three branches of government… Watch a few “fan interviews” of the Jersey Shore, and then keep a straight face while telling me that government has done a great job educating our youth.
4. Helping us retiring with dignity
Because nothing is more dignified than depending on a paternalistic government Ponzi-scheme for financial security in your golden years, right?
5. Improving public health
Ebola. (And on the off-chance that you’re still not skeptical, here’s another one-word answer: Healthcare.gov.)
6. Building our transportation network
Federal data shows there are roughly 63,000 “structurally deficient” bridges in the US. Of course, this doesn’t even skim the surface of roadways that are deteriorating on a daily basis. Heck, on my way to the convenience store, I routinely have to dodge a pothole that has the capability of swallowing my Jeep Rubicon. And all of this deterioration is despite the massive amount of time and energy our state, local, and federal governments have dedicated to “stimulating” the economy with a little rush-hour timed construction work. (I actually have a running theory that my home state has no storage unit for traffic cones… After all, that’s the only logical reason for blocking off a four mile stretch of a major interstate so crews can repaint 25 foot of the HOV merging lane.)
7. Investing in communications
Sure, the government owns the radio frequencies… Too bad they haven’t been able to develop a dependable way to alert President Obama to impending scandals before the media breaks a story.
8. Building our energy supply
Because nothing says “efficient use of taxpayer funds” quite like a bankrupt green-energy company in California.
9. Inventing the future (NASA)
Wait… “Inventing” or “investing”? Because last time I checked, “Muslim outreach” wouldn’t necessarily fall under either one of those categories. (Well… Unless our defense against ISIS is far worse than even conservatives fear.)
10. Defeating totalitarianism
Right. So government is super effective at killing the effects of overbearing government. This makes total sense.
Social media and financial advice aren’t such an easy match after all.
Sure, the initial attraction is obvious. With one stroke, advisers can woo clients with regular investment tips on Facebook and Twitter, building an audience and drumming up business. Then, after establishing a rapport with their followers, they can follow up with one-on-one video conferencing to clients on Skype or FaceTime without leaving their screens.
But back up a minute.
Old-fashioned, face-to-face communication is still key, advisers say, even for those who use social media extensively. In-person meetings are a must to glean nuances about risk tolerance and financial needs that clients may not even realize about themselves, let alone be able to communicate. Worse, pat advice on Facebook and Twitter can run the risk of looking like a hot tip and other worthless advice littering some investment websites.
So, how best to proceed on social media? Here are some things to consider:
1. Set the right tone
Being on social media is about “being where the people are. It’s about being engaged, sincere, genuine and contributing something of value. And over time, you build relationships,” said Will Britton, a financial adviser in Kingston.
For him, social media is a place to begin a conversation. For instance, he hopes to open dialogues with his regular roundup of stories from financial media, acting as a mini news service for people following him on Twitter. By linking to these stories and affixing his Twitter tag, he’s effectively handing out electronic business cards to the world.
“My presence [on social media] is enough for people to know what I do professionally. There’s certainly some professional content, whether it’s sharing links to worthwhile articles or videos or stuff that I come across.”
It’s a faux pas, though, to look like someone selling something, he said.
“I try to stay away from overt marketing, A) because we get into compliance issues from an industry point of view, and B) I just don’t think that that’s what the people on those platforms want anyway. They’re looking for connections and conversations and engagement. They’re not looking for spam and ads and ‘Come buy this from me,’” he said.
2. Differentiate between public and private
Investment professionals need to draw a clear line between public and private, a line that’s not always clear in social media, nor in real life.
Take this easy scenario: a conversation at a children’s hockey game. In the stands, parents inevitably get to talking. Often the topic will turn to money and, sooner or later, an investment pro such as Mr. Britton will have to mention that he’s a financial adviser.
That’s when another parent may get serious and ask a direct question about the family’s finances. That’s when the informal conversation needs to stop and continue in private. It’s best to think of social media as a giant referral service for investment advisers, he said.
“I think a lot of the time, people definitely aren’t going to the Yellow Pages [to find advisers], and I don’t even know if they’re going to Google any more,” he said. “They are crowdsourcing that information. They’re going to their community, wherever it is, whether it’s online or off, and saying, ‘Hey, does anyone know a good financial planner?’”
3. Social media still isn’t seen as a replacement for traditional financial news sources
There’s skepticism surrounding social media as an information source in the investment community.
Institutional investors remain particularly wary, according to a global poll by communications network AMO conducted in January this year. Their survey of 105 institutional investors in 12 countries found that 85 per cent feel that social media sites are generally not reliable for financial news.
Yet, at the same time, they also indicate a future for it, with 82 per cent saying that social media is growing in importance in financial communications. Thirty-nine per cent of these are prone to looking at investment forums for work regularly or occasionally, and 28 per cent consult them under exceptional circumstances. LinkedIn was the most popular of the social media sites, with 59 per cent consulting it at some point, although a large 41-per-cent segment reported never using it professionally. About 46 per cent reported ever consulting Twitter professionally.
Similarly for retail investors, an online survey in August of 2013 for BMO InvestorLine found that social media platforms, such as LinkedIn and Facebook, were still slow to be seen as reliable investment-news vehicles. Only a third of the 1,020 Canadian investors surveyed said they use social media for investment insights.
In comparison, 69 per cent of those investors surveyed said they found TV current events and business news trustworthy, and 55 per cent said the same for newspapers and magazines. So linking to more traditional news sources may still be a good habit for advisers online, rather than linking to blogs, forums or other social media.
All of this suggests that social media continues to make inroads, but it still has a way to go.
4. Organize online advising more effectively
Victor Godinho, a financial planner in Toronto and still in his early twenties, sees social media as perfectly suited to the 20- to 40-year-old crowd he caters to. Every Friday, he posts a financial tip on his social media sites, from Instagram and Facebook to Twitter and Pinterest. He has a client in Ottawa with whom he conferences on Skype.
Yet he adds that Skype and social media require a more effective use of time, rather than just chatting for an hour in his office. “You need to keep their attention [online], or you need to make sure they’re on the same page as you, considering you’re in two different locations.”
It’s a supplement to in-person meetings. “Every year when we do our annual review, we’ll meet in person,” he said, and “when you’re in-person, you’re inclined to talk more than just business.”
But for a video conference, advisers need to send clients documents ahead of time. Time onscreen needs to be managed more efficiently, and the meeting needs to move along at a faster speed. More pre-planning is required to make the meeting more effective. It requires a different communication skill, with a focus on not wasting time.
“If you can make that easier on your client, that’s the best thing you can do,” Mr. Godinho said.
What can an individual who lives on a small salary do to invest and augment his income somehow? Here are some tips to follow:
1. Invest in something close to your heart
Whether it is in music or cooking, investing in a small venture will have a greater chance of surviving and even achieving reasonable success if it involves doing something close to your heart or within your experience as a person or as a worker. If you work as a waiter, why not learn as much as you can about some way of improving a recipe or a drink and come up with your own sideline you, or with a partner, can run during weekends or after work?
We hear this advice often and yet not many take it to heart or are brave enough to actually do it. Many feel it takes too much effort and money to start a business. This is not true, in general. Making a single unique jacket or fashion accessory and selling it can be the one step you need to encourage yourself to make more. Even a used item such as a broken sofa, if repaired and furbished to look attractive might bring you some income you never thought you could have from what you already have.
Oftentimes, all it takes is a lot of imagination and a dose of courage to jump right ahead on a new venture you never tried before.
2. Learn the basic math
Any business, small or big, will depend largely on good and proper basic accounting. Learning the fundamental methods of bookkeeping will go a long way to controlling the flow of resources and understanding the nature of your business finance. We all knew about the Chinese who, for many centuries, used the abacus to make sure they got all the math figured out. With the calculator or the PC today, the job has become even easier and more efficient as we can keep records as well of our transactions.
Still, there are other tricks we can avail of to make the task easy and more enjoyable. Finger-Math can be a tool one can learn and use during those hectic moments when technology Is not around to your aid. Mental math is a trick we can also develop to enhance our acuity in this area. Whatever suits your personality and style, make sure the math is a primary focus in your business. Remember, math is but a tool to make your work easier; but loving the work can make a lot of difference in how you conduct the business.
3. Know you product
Knowing your product is as important as how much you price it eventually. You may have a good round figure for your product’s price; but if you have not truly known your product (what it directly provides, what value it adds to its user, how it can be enhanced beyond its basic use), you will not fathom its true worth for you and for your customer.
Knowing your product goes beyond appreciating its innate value. Peanut butter is not just for making bread taste better or eating by itself. It can also be used for adding flavour to other recipes or with other food (try it with banana). And unless you tell people it can be used as so, they will never discover its other uses. Advertising or showing it in your packaging can be the step you need to do to enhance your product’s value and appeal as well as its price.
4. Know your customers
Not all people will want to buy your product or service. How to change their mind is the challenge you must never give up on. Changing your approach may allow you to capture certain customers you know patronize other brands. Price reduction, although it is not always the best thing to do or other come-ons, such as giveaways or freebies, may help promote your product in certain market locations you wish to capture.
Talking to people and being sensitive to their needs will help you get a clearer picture of your prospective customers.
5. Know your competitors
Knowing your customers will teach you how to appreciate and know your competitors indirectly as well. If you feel your product is better than your competitors and yet you cannot break into the bigger share of the market , then there must be something wrong with your product or your marketing approach.
Companies who have been in the business for many years have a lot to teach you how to go about your own venture. Get as much information from them directly through visiting their stores and factories or indirectly through reading books, magazines and websites.
6. No matter how many competitors you have, you can still join in if you are unique
Unless every corner in your area has a small variety store, you can still put up your own as long as you provide a unique feature in your business. Delivering your product while others wait for buyers can be your advantage in these busy times. Or, you can have orders picked up at certain times to encourage people to buy fresh vegetables, fruits or meat, for instance. The trick is to make your customers feel special and given a personal touch. Adding something nobody else provides may be the advantage you need to keep the competitors behind.
7. Find out what works for you and your product
Eventually, you will have to experiment and make a lot of mistakes as to how you can improve your product, your price and your style of operation. But things will change as economic and social realities also change ad adapting creatively will allow you to stay afloat. Being prepared for such eventualities ahead of others will help you reduce risks and manage your business well.
In the end, running a business may take more and more of your time and may lead you to give up your day-job. If you feel the time is right, then go ahead. Most business-people started that way. Make up your mind at the very start that the option is always present. It is just a matter of time when you will take the brave jump.
McAfee report paints grim picture of lucrative industry, despite incomplete data.
Cybercrime could be costing the global economy as much as $575 billion annually, according to a new report from McAfee.
The Intel-owned security company based its estimate on a range of sources, from government agencies to NGOs and academic institutions, counting both direct and indirect costs.
The report, Estimating the Global Cost of Cybercrime explained the methodology as follows:
“This study assumes that the cost of cybercrime is a constant share of national income, adjusted for levels of development. We calculated the likely global cost by looking at publically available data from individual countries, buttressed by interviews with government officials and experts. We looked for confirming evidence for these numbers by looking at data on IP theft, fraud, or recovery costs. In addition to a mass of anecdotes, we ultimately found aggregate data for 51 countries in all regions of the world who account for 80% of global income. We used this data to estimate the global cost, adjusting for differences among regions.”
However, the vendor cautioned that “differences in the thoroughness of national accounting”, as well as underreporting of incidents and the difficulty of valuing IP all make calculations an imprecise art.
High income countries lost more as a percentage of GDP, which could be because they have better accounting systems in place and/or that their IP is more valuable and therefore a bigger target for criminals.
The $575bn figure therefore comes from extrapolating a global total from high loss countries. It could be as low as $375bn if McAfee had extrapolated from “all countries where we could find open source data”.
On the other hand, the figure would be $445bn if the firm aggregated costs as a share of regional incomes, it said.
Whatever the final figure, it’s clear that richer countries in Europe, North America and Asia lost the most, because they are bigger targets and provide a better return on investment for the hacker. For example, G20 countries are said to have lost $200bn to cybercrime.
The UK, at 0.16%, had one of the lowest losses to cybercrime as a percentage of GDP, while the US (0.64%), came just ahead of China (0.63%) but trailed the most affected G20 nation: Germany (1.6%).
McAfee warned that as more businesses and consumers move online and more devices connect to the internet of things, cybercrime will continue to grow. IP theft, a “tax on innovation” will also increase as those countries which acquire it become more adept at building a competitive advantage.
Aside from calling for improvements to technology and defences, the report urged governments to work harder on creating best practice cybersecurity standards and cross-border law enforcement agreements.
It added that they must do a better job on accounting for cybercrime losses to provide a more comprehensive picture on where deficiencies lie.
For the record, McAfee’s report last year estimated cybercrime losses of $100-500bn annually.
By Maria Gallucci – Global economic growth is expected to dip this year, following the fiercely cold winter that plagued the United States and turbulence in Ukraine and the world’s financial markets.
The World Bank on Tuesday said it reduced its global growth forecast to 2.8 percent this year, down from a January projection of 3.2 percent, Bloomberg News reported.
The U.S. forecast was cut to 2.1 percent from 2.8 percent, and outlooks for Brazil, Russia, India and China also fell — a sign that emerging economies aren’t moving fast enough or investing sufficiently in domestic structural reforms, which are needed to accelerate economic expansion, according to the Washington-based institution. It recommended smaller budget deficits, higher interest rates and productivity-boosting measures to stave off future financial unrest, Bloomberg said.
The growth setbacks, however, might be short-lived. The 2015 projection for global economic growth held steady at 3.4 percent, Bloomberg noted, and growth is expected to regain speed this year despite earlier weaknesses, the World Bank said in its Global Economic Prospects report.
“The financial health of economies has improved. … But we are not totally out of the woods yet,” Kaushik Basu, the lender’s chief economist, said. “A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis. In brief, now is the time to prepare for the next crisis.”
The World Bank’s most recent Global Economic Prospects (GEP) report, released this week, says a global economic recovery is underway, underpinned by strengthening output and demand in high-income countries.
Global GDP growth in 2014 will be 2.8 percent and it is expected to rise to about 4.2 percent by 2016, according to the report, which the World Bank publishes twice a year.
Average GDP growth in developing countries has reached 4.8 percent in 2014, faster than in high-income countries but slower than in the boom period before the global financial and economic crisis of 2008.
Demand side stimulus or supply side reforms?
The global economic slowdown that struck in 2008 was caused by a financial crisis that resulted in large part from the bursting of an enormous, fraud-ridden mortgage lending bubble in the US.
The crisis led to varying responses in different countries. The GEP report’s authors said that in general, developing countries privileged demand stimulus policies over structural reforms during the past several years.
For example, in 2008 to 2009, China implemented a four trillion-renminbi ($586 billion) stimulus program as a direct response to the slowdown in global trade caused by the global financial crisis.
Critics pointed to over-investment in China as a risk to continued fast growth. The country is now struggling to contain a real estate bubble of its own.
The World Bank wants China and other emerging countries to refocus on structural reforms.
“A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis,” the bank’s chief economist, Kaushik Basu, has said. “In brief, now is the time to prepare for the next crisis.”
The World Bank’s mantra: Fiscal discipline and structural reforms
Yet the World Bank is well known for nearly always prescribing fiscal “tightening” – or cutbacks to government expenditures – and “structural reforms.”
What is the rationale for public expenditure cutbacks? And what does the World Bank mean by “structural reforms?”
The World Bank consistently urges policymakers to prevent annual deficits from growing faster than the rate of GDP growth. Rising debt-to-GDP ratios mean that an increasing share of the public budget is devoted to servicing debt, leaving proportionately less money available to pay for government-provided infrastructure and services.
However, sometimes countries fall into recession when households, in aggregate, attempt to pay back previously incurred debt faster than they take up new debt. In the jargon of economists, this is called “deleveraging.”