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Showing posts from July, 2011

What is 'the House' in American politics?

The American political system has three centres of power: the President and the two chambers in the American Congress the - Senate and the House of Representatives. 'The House' is the bigger body because congressmen are elected at a local level while the Senate consists of two senators from each State.


At present the Presidency & the Senate are controlled by the Democrats. The Republicans have a majority in the House. Legislation has to pass from the House to the Senate and finally to the President. 


Because the two main parties (the Republicans & the Democrats) have major philosophical differences (listen to a short explanation here) most legislation is contested.


Basics of American Politics (14th Edition)
The Complete Idiot's Guide to U.S. Government and Politics

What is a credit default swap?

Warren Buffett famously described 'derivatives' like CDS as 'financial weapons of mass destruction'. Here is a description of how they work.



The Big Short: Inside the Doomsday Machine
Warren Buffett Invests Like a Girl: And Why You Should, Too (Motley Fool)

What is a basis point?

The cost of insuring Treasuries rose five basis points to 54.5 basis points, according to CMA prices for credit-default swaps. Credit-default swaps' were the primary cause of the financial collapse in 2008.
A basis point is 1/100th of one percent (0.001%). Not a commonplace calculation and most accountants would not need to trouble with it in most transactions. But basis points are part of everyday conversation in Ireland, Greece, Portugal and now Italy. This is because the cost of insuring government debt is calculated to basis points as this recent example from the financial press shows:
 Italian five-year CDS was 69 basis points wider at 512 basis points, nearing its record of 521 basis points hit on Sept. 21, according to data-provider Markit.A CDS is a credit default swop - a form of insurance of mind-bending complexity. You can see a short video explanation here.

Financial Accounting As a Second Language
Wall Street Lingo: Thousands of Investment Terms Explained Simply