Political Science Final

EXTRADITION

All nations seek to extradite citizens and non citizens alike for crimes outside the host country : Julian Assange to Sweden and possibly U.S. for WikiLeaks of classified U.S. documents similar to Pvt. Manning.

TOXIC ASSET

An asset that becomes illiquid when its secondary market disappears. Toxic assets cannot be sold, as they are often guaranteed to lose money. The term "toxic asset" was coined in the financial crisis of 2008/09, in regards to mortgage-backed securities, collateralized debt obligations and credit default swaps, all of which could not be sold after they exposed their holders to massive losses. If John Doe buys a house and takes out a $400,000 mortgage loan with a 5% interest rate through Bank A, the bank now holds an asset - a mortgage-backed security. Bank A is now entitled to sell the asset to another party (Bank B). Bank B, now the owner of an income-producing asset, is entitled to the 5% mortgage interest paid by John. As long as house prices go up and John continues to pay his mortgage, the asset is a good one. If, however, John defaults on his mortgage, the owner of the mortgage (whether Bank A or Bank B) will no longer receive the payments to which it is entitled. Normally, the house would then be sold, but if the house price has declined in value, only a portion of the money can be regained. As a result, the securities based on this mortgage become unsellable, as no other party would pay for an asset that is guaranteed to lose money. In this example, the mortgage-backed security becomes a toxic asset.

FILIBUSTER

An attempt to defeat a bill in the Senate by talking indefinitely, thus preventing the Senate from taking action on the bill

IMF

An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating the expansion and balanced growth of international trade. 3. Assisting in the establishment of a multilateral system of payments for current transactions. The IMF plays three major roles in the global monetary system. The Fund surveys and monitors economic and financial developments, lends funds to countries with balance-of-payment difficulties, and provides technical assistance and training for countries requesting it.

WTO

An international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. Some, especially multinational corporations, believe that the WTO is great for business. Others believe the WTO will undermine the principles of democracy and simply make the rich much richer.

big 6 banks

B of A, Citigroup, Goldman Sacks, JP Morgan Chase,m Morgan Stanley and Wells Fargo. Then AIG unregulated insurance giant

MAD

Both side lose in a nuclear war

CREDIT DEFAULT SWAPS

CDOs, or Collateralized Debt Obligations, are sophisticated financial tools that banks use to repackage individual loans into a product that can be sold to investors on the secondary market. These packages consist of auto loans, credit card debt, mortgages or corporate debt. They are called collateralized because the promised repayment of the loans are the collateral that gives the CDOs value. CDOs are a special type of derivative. Like its name implies, a derivative are any kind of financial product that derives its value from another underlying asset. Derivatives, such as put options, call options and futures contracts, have long been used in the stock and commodities markets. CDOs are called asset-backed commercial paper if the package consists of corporate debt, and mortgage-backed securities if the loans are mortgages. If the mortgages are made to those with a less than prime credit history, they are called subprime mortgages. Banks sold CDOs to investors for three reasons: The funds they received gave them more cash to make new loans. It moved the loan's risk of defaulting from the bank to the investors. CDOs gave banks new and more profitable product to sell, which boosted share prices and managers' bonuses.

CONSUMER PRICE INDEX (CPI)

CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation and large drops in CPI during a short period of time usually mark periods of deflation. A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. Sometimes referred to as "headline inflation."

DERIVATIVES

Derivatives are securities whose value is derived from the some other time-varying quantity. Usually that other quantity is the price of some other asset such as bonds, stocks, currencies, or commodities. It could also be an index, or the temperature. Derivatives were created to support an insurance market against fluctuations.

MONETARY POLICY

In the United States, the Federal Reserve is in charge of monetary policy. Monetary policy is one of the ways that the U.S. government attempts to control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow. In general, the U.S. sets inflation targets that are meant to maintain a steady inflation of 2% to 3%. The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).

JOHN MAYNARD KEYNES

Keynes was one of the most groundbreaking economists of his day. He created many of the new ideas that went on to become accepted post World War II. Many national governments began to follow certain macroeconomic statistics more closely, including interest rates and employment because of Keynes academic efforts. An author and economist who is well-known for his stance that national governments should attempt to smooth out the effects of expansion and contraction in the business cycle by using fiscal and monetary policy. Keynes is regarded as one of the founding fathers of modern day macroeconomic theory, and his views on economic theory have developed into a subset of economic theory called "Keynesian economics".

art of reverrse engineering

Legally sanctioned method of copying a technology which (as opposed to starting from scratch) begins with an existing product and works backward to figure out how it does what it does. When the product's basic principle or core concept is determined, the next step is to reproduce the same results by employing different mechanisms to avoid any (legally forbidden) patent infringement. A common practice worldwide, reverse engineering is responsible for the ubiquitous 'IBM Compatible' computers, and is called emulation in software industry

MORTGAGE BACKED SECURITIES

Mortgage-backed securities (MBS) are investments, somewhat similar to stocks, bonds or mutual funds. Their value is secured, or backed, by the value of an underlying bundle of mortgages. When you buy a MBS, you aren't buying the actual mortgage. Instead, you are buying a promise to be paid the return that the bundle will receive. An MBS is a derivative, because its value is derived from the underlying asset. How Does a Mortgage-Backed Security Work? First, a bank or mortgage company makes a home loan. The bank then sells that loan to an investment bank or a quasi-governmental agency like Fannie Mae, Freddie Mac or Ginnie Mae. They bundle a lot of loans with similar interest rates. They then sell a security that delivers the same payments that the bundle of loans do. That's the MBS, which is a security backed by the mortgage. The MBS is sold to institutional, corporate or individual investors on the secondary market. The MBSs sold by the governmental agencies were particularly attractive, because the returns were guaranteed by these agencies, who were themselves backed by the Federal government. Therefore, those who bought a Fannie Mae or Freddie Mac MBS knew they would get something in return for their investment. Ginnie Mae absolutely guaranteed that investors would receive their payments. (Source: SEC, Mortgage-backed Securities)

BRITTON WOODS SYSTEM

Nations attempted to revive the gold standard following World War I, but it collapsed entirely during the Great Depression of the 1930s. Some economists said adherence to the gold standard had prevented monetary authorities from expanding the money supply rapidly enough to revive economic activity. In any event, representatives of most of the world's leading nations met at Bretton Woods, New Hampshire, in 1944 to create a new international monetary system. Because the United States at the time accounted for over half of the world's manufacturing capacity and held most of the world's gold, the leaders decided to tie world currencies to the dollar, which, in turn, they agreed should be convertible into gold at $35 per ounce. Under the Bretton Woods system, central banks of countries other than the United States were given the task of maintaining fixed exchange rates between their currencies and the dollar. They did this by intervening in foreign exchange markets. If a country's currency was too high relative to the dollar, its central bank would sell its currency in exchange for dollars, driving down the value of its currency. Conversely, if the value of a country's money was too low, the country would buy its own currency, thereby driving up the price. The Bretton Woods system lasted until 1971. By that time, inflation in the United States and a growing American trade deficit were undermining the value of the dollar. Americans urged Germany and Japan, both of which had favorable payments balances, to appreciate their currencies. But those nations were reluctant to take that step, since raising the value of their currencies would increases prices for their goods and hurt their exports. Finally, the United States abandoned the fixed value of the dollar and allowed it to "float" -- that is, to fluctuate against other currencies. The dollar promptly fell. World leaders sought to revive the Bretton Woods system with the so-called Smithsonian Agreement in 1971, but the effort failed. By 1973, the United States and other nations agreed to allow exchange rates to float.

factor price equalization

Factor price equalization is an effect observed in models of international trade -- that the prices of inputs to ("factors of") production in different countries, like wages, are driven towards equality in the absence of barriers to trade. This happens among other reasons because price incentives cause countries to choose to specialize in the production of goods whose factors of production are abundant there, which raises the prices of the factors towards equality with the prices in countries where those factors are not abundant. Shocks to factor availability in a country would cause only a temporary departure from factor price equality.

STAGFLATION

Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects. A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.

DODD FRANK ACT

The Dodd-Frank Wall Street Reform Act was the most comprehensive financial reform since the Glass-Steagall Act. Like Glass-Steagall, it sought to regulate the financial markets and make another economic crisis less likely. Banks were deregulated in 1999 by the Gramm-Leach-Bliley Act, which repealed Glass-Steagall. The Dodd-Frank Act was named after the two legislators who created it. It was introduced by Senator Chris Dodd on March 15, 2010 and passed by the Senate on May 20. The bill was revised by Congressman Barney Frank and approved by the House on June 30. On July 21 2010, President Obama signed the Dodd-Frank Wall Street Reform Act into law. (Source: U.S. Senate, Dodd-Frank Wall Street Reform Act, Morrison & Forster, Summary of Dodd-Frank Reform Act) Dodd-Frank proposed eight areas of regulation. Here are the major parts of the Act. Regulate Credit Cards, Loans and Mortgages: Oversee Wall Street: Stop Banks from Gambling with Depositors' Money: Regulate Risky Derivatives: Bring Hedge Funds Trades Into the Light: Oversee Credit Rating Agencies: Increase Supervision of Insurance Companies: Reform the Federal Reserve:

Federal open market committee

The Federal Open Market Committee (FOMC) is the monetary policy arm of the Federal Reserve, the central bank of the United States. This means the FOMC is responsible for fighting inflation and unemployment. It does this by adjusting interest rates. It lowers interest rates to spur economic growth and reduce unemployment (expansionary monetary policy). It raises interest rates to to reduce inflation (contractionary policy). he FOMC adjust interest rates by setting a target for the Fed funds rate. Banks use this rate to guide all other interest rates. As a result, the Fed funds rate controls the availability of money to invest in houses, business and ultimately in your salary and investment returns. By doing this, the FOMC is responsible for controlling inflation while avoiding recession. If the FOMC raises the rate, then money becomes more expensive, which slows the economy down. A slower economy means that businesses can't afford to raise prices without losing customers, and may even lower prices to gain customers. This will lower inflation. If the FOMC lowers the rate, then money becomes more liquid, which stimulates the economy. If the economy grows too fast, then prices will rise, causing inflation.

auditing

The GAO serves as a sort of financial watchdog over government spending. It monitors the operating results, financial positions and accounting systems used by the various governmental agencies. The GAO also conducts routine audits on all branches of government. A department of the U.S. government that monitors and audits government spending. The General Accountability Office (GAO) tracks how the legislative and executive branches of the government use tax-payer dollars and then reports the findings directly to Congress. The Comptroller General serves as head of the GAO. The information collected for review of a company's financial transactions, internal control practices, and other factors necessary for the certification of financial statements by a certified public accountant. The amount and type of auditing evidence considered varies considerably based on the type of firm being audited as well as the required scope of the audit.

GLASS STEGALL ACT

The Glass-Steagall Act, also known as the Banking Act of 1933, separated investment banking from retail banking. It prevented banks from using depositors' funds for risky investments such as the stock market. Glass-Stegall gave tighter regulation of retail banks to the Federal Reserve, prohibited bank sales of securities, and created the Federal Deposit Insurance Corporation (FDIC). Investment banks help corporations raise money by organizing the initial sales of stocks, facilitating mergers and acquisitions, and operating hedge funds. Retail or commercial banks take deposits, manage checking accounts and make loans. Commercial banks are protected by the government. Their deposits are insured by the , and they are regulated by the Federal Reserve.

GNP

The Gross National Product (GNP) is the value of all the goods and services produced in an economy, plus the value of the goods and services imported, less the goods and services exported.

TRUMAN DOCTRINE

The Truman Doctrine was essentially the U.S's Containment policy during the Cold War. The policy of Containment was the U.S's commitment to prevent the spread of communism into Western Europe and Latin America. The Truman Doctrine led to the Marshall Plan, which was U.S. aid given to countries deemed most vulnerable to communism. The Truman Doctrine also stated that communist aggression would not be tolerated in any part of the world.

VOLKER RULE

The Volcker Rule prohibits banks from owning, investing in, or sponsoring hedge funds, private equity funds, or any proprietary trading operations for their own profit. The Volcker Rule prevents financial firms from using deposits that are insured by the FDIC to run hedge funds and private equity funds. The Rule also limits the liabilities that the largest banks can hold. This limitation is intended to reform former investment banks, like Goldman Sachs and Morgan Stanley. These banks changed into commercial banks during the financial crisis just so they could take advantage of taxpayer-funded bailouts. It also seeks to protect depositors in the largest retail banks, like JP Morgan Chase and Citi.

SEQUESTER

Sequestration is a term used to describe the practice of using mandatory spending cuts in the federal budget if the cost of running the government exceeds either an arbitrary amount or the the gross revenue it brings during the fiscal year. (fiscal cliff) Simply put, sequestration is the employment of automatic, across-the-board spending cuts in the face of annual budget deficits.

WORLD BANK

The World Bank is a collection of international organizations to aid countries in their process of economic development with loans, advice, and research. It was founded in the 1940s to aid Western European countries after World War II with capital. The World Bank Group was created on December 27, 1945 as part of the Bretton Woods agreement. Its five agencies are: International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA) International Centre for Settlement of Investment Disputes (ICSID) The term "World Bank" usually refers to the IBRD and IDA, whereas World Bank Group refers to the institutions as a whole. Five international organizations dedicated to providing financial assistance and advice to countries struggling with poverty and economic development. The World Bank generally focuses on developing third-world countries, helping them in areas such as health, education and agriculture. This bank provides loans and grants at discounted rates to these countries.

COMPARITIVE ADVANTAGE

The ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. Having a comparative advantage - or disadvantage - can shape a company's entire focus. For example, if a cruise company found that it had a comparative advantage over a similar company, due ito its closer proximity to a port, it might encourage the latter to focus on other, more productive, aspects of the business. It is important to note that a comparative advantage is not the same as an absolute advantage. The latter implies that one is the best at something, while the former relates more to the costs of the particular endeavor.

MARGIN BUYING

The purchase of an asset by paying the margin and borrowing the balance from a bank or broker. Buying on margin refers to the initial or down payment made to the broker for the asset being purchased. The collateral for the funds being borrowed is the marginable securities in the investor's account. Before buying on margin, an investor needs to open a margin account with the broker. In the U.S., the amount of margin that must be paid for a security is regulated by the Federal Reserve Board.

INFLATION

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum. As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year. Most countries' central banks will try to sustain an inflation rate of 2-3%.

DETERRENCE

This is basically what happened during the cold war. It started in 1945 when the US nuked Japan. After WW2 ended, the US and Russia became enemies, and you might say, we were in a state of war. However. no shots were fired. The Soviet Union's premiere, Nikita Khrushchev vowed to bury us. They had the capability to do it. However we too, had the capability to bury them, and by nuking Japan , we already proved we had the bomb and would use it. As much as Khrushchev was wanting to destroy us, he knew that if he did, his country would also be destroyed. So, to sum it up, each country's capabilities were a deterrence to the other's ambitions. Nuke us, we nuke you. .It wasn't one single weapon or an agreement, it was just the realization of what could happen.Eventually, the cold war was over, and not a shot was fired. mutual annihilation equals hesitation to attack

CONGRESSIONAL BUDGET COMMITTEE (CBO)

a federal agency within the legislative branch of the United States government. It is a government agency that provides economic data to Congress, non partisan started in 1974 to understand budget to members of congress

house ways and mean s

a standing committee considering al revenue decisions, tax policy and changes in the tax code and sending budget to appropriations committee before it goes to the senate finance committee

span of control

ability to control directly no more than 6-8 people

fro video of profits or patients, what was main point of affordable care act that impacts every us citizen?

affordable care act is not focusing on insurance companies not making a profit insurance comps are limited to how much they profit they make

RIDER

an additional provision annexed to a bill under the consideration of a legislature, having little connection with the subject matter of the bill.

suni

arab

GSE

are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors: agriculture, home finance and education. fannie mae and freddie mac The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors primarily by reducing the risk of capital losses to investors: agriculture, home finance and education. The two most well known GSEs are the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac.

federal trade commission (FTC)

commerce between and inside states

JOINT COMMITTEE

committee on which both representatives and senators serve, both house and senate

SIMPSON BOWLES COMISSION

deficit and debt commission national committee of fiscal responsibility tried to create grand bargain to avoid sequestration- cuts in entitlements and defense

micro budgeting

done by congressional appropriations committee- dept. budgets

macro budgeting

done by director of OMB- total fed budget

fair labor standards act

federal labor law applies to all workers

which healthcare system is most like us but half the cost

germany single payer system germans allow opt out while swiss don't

SECURITIZATION

government debt guarantees like those offered by fannie mae

PROCUREMENT

government purchasing largest item in defense budget

demand side fiscL POLICY

govt helps society in social security medicare entitlement programs and home loans preferred by democrats

what was paulsons biggest mistake in banking crisis of 08?

he let lehman bros go bankrupt therefore brought derivatives and us banking system down had to be bailed out

SARBANES OXLEY ACT

he rules and enforcement policies outlined by the SOX Act amend or supplement existing legislation dealing with security regulations. The two key provisions of the Sarbanes-Oxley Act are: 1. Section 302: A mandate that requires senior management to certify the accuracy of the reported financial statement 2. Section 404: A requirement that management and auditors establish internal controls and reporting methods on the adequacy of those controls. Section 404 had very costly implications for publicly traded companies as it is expensive to establish and maintain the required internal controls. An act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards.

FDIC

insures bank deposits up to 250,000 per account

LEGISLATIVE ANALYST OFFICE

is a nonpartisan government agency that has been providing fiscal and policy advice to the California Legislature since 1941. It is known for its fiscal and programmatic expertise and nonpartisan analysis of the state budget. The office serves as the "eyes and ears" for the Legislature to ensure that the executive branch is implementing legislative policy in a cost-efficient and effective manner. The LAO was the first such institution in the United States that was designed to help both houses of a legislature manage the state budget in a strictly nonpartisan fashion; it inspired the creation of many similar agencies in other states, as well as the creation of the nonpartisan Congressional Budget Office in 1974. The LAO should not be confused with the California Legislative Counsel (a position established in 1913) which provides a broader range of services and does not focus primarily on the budget.

OMB

is an executive agency, a branch of the White House that oversees the operations of federal departments and agencies. In the budget process, they work with agencies to formulate their budgets that will be rolled up into the President's budget and presented to Congress. OMB also monitors agencies' performance and ensures that they comply with executive policies. OMB is accountable to the President. in the white house where president prepares yearly budget fiscal year october 1 but july 1 in california the omb is similar to the department of finance in california in the office of the governor who makes up the budget

ENTITLEMENTS

largest spending category of the federal budget and a guaranteed payments to selected persons who qualify- social security and Medicare

trustee

leg. decide policy on their own beliefs

politico

leg. follow own judgement or constituents depending on the issue

delegate

leg. reflect wishes of their constituents

SUPPLY SIDE FISCAL POLICY

less government regulation favored by conservative republicans Supply-side economics, also known as trickle-down economics, is an economic theory that states that a reduction in taxes will stimulate the economy through increased consumer spending. Over time, the boost to economic growth will generate a larger tax base, which will make up for the revenue lost from the tax cut.

line and staff

line supervisor directing staff to implement policy

Affordable Care Act

most rapidly growing item in the federal budget. most benefits go to middle and upper class participants- upheld in the florida v dept. of health and human services

unity of command

one supervisor to command to direct command of staff

STANDING COMMITTEE

permanently established legislative committees that consider and are responsible for legislation within a certain subject area

shiite

persian

jihad

religious war

food and drug administration FDA

safety in all food and drug products

federal consumer protection agency

started in 2012

SALT

strategic arms limitation treaty us w/ russia in 1989 to stop the arms race

SDI

strategic defense initiative missile defense system congress has major influence over military installation locations and closing of bases

demographics

the composition of the voting public- age, gender, income etc.

GLASNOST

the policy of maximal publicity, openness, and transparency in the activities of all government institutions in the Soviet Union, together with freedom of information, introduced by Mikhail Gorbachev in the second half of 1980s. Glasnost can also refer to the specific period in the history of the USSR during the 1980s when there was less censorship and greater freedom of information. Glasnost translates to English as "freedom of speech." Gorbachev believed that if he was more open with the public, it might help lessen the corruption of the Soviet government and the Communist Party. This was Gorbachev's way of being more open with his people without completely divulging any secrets or information.

bureacracies

the structure and set of regulations in place to control activity, usually in large organizations and government. It is characterized by standardized procedure (rule-following), formal division of responsibility, hierarchy, and impersonal relationships. In practice the interpretation and execution of policy can lead to informal influence. Bureaucracy is a concept in sociology and political science referring to the way that the administrative execution and enforcement of legal rules are socially organized. Four structural concepts are central to any definition of bureaucracy: a well-defined division of administrative labor among persons and offices, a personnel system with consistent patterns of recruitment and stable linear careers, a hierarchy among offices, such that the authority and status are differentially distributed among actors, and formal and informal networks that connect organizational actors to one another through flows of information and patterns of cooperation. Examples of everyday bureaucracies include governments, armed forces, corporations, hospitals, courts, ministries and schools.

SUPERGRADE

the top three grades for federal civil service employees (GS 16, 17, 18)

civil service

use of tests to qualify to insure quality of employee competence and dustinguish btw pay grades

zero sum game

what one side gains the other side loses without increasing the total

PERESTROIKA

which comes from the Russian word that means "restructuring," is basically defined as the restructuring of the political, social and economical system. In Gorbachev's case, perestroika was a type of restructuring that helped develop democracy throughout the USSR. However, it was met with great resistance from the economic bureaucracy, as it gave more economic independence to companies rather than the main force. the political and economic reforms introduced in June 1987[1] by the Soviet leader Mikhail Gorbachev. Its literal meaning is "restructuring", referring to the restructuring of the Soviet economy. Perestroika is often argued to be one reason for the fall of communist political forces in the Soviet Union and Eastern Europe, and for the end of the Cold War.

SELECT COMMITTEE

A Legislative committee created for a limited time and for a specific purpose. Usually considered a committee that is chosen to be impartial. Mostly done these days because it is not is a congressional committee appointed to perform a special function that is beyond the authority or capacity of a standing committee. A select committee is usually created by a resolution that outlines its duties and powers and the procedures for appointing members. Select and special committees are often investigative in nature, rather than legislative, though some select and special committees have the authority to draft and report legislation. A select committee generally expires on completion of its assigned duties, though they can be renewed. Several select committees are treated as standing committees by House and Senate rules, and are permanent fixtures in both bodies continuing from one congress to the next. Examples of this are the Permanent Select Committee on Intelligence in the House and the Select Committee on Intelligence in the Senate. The Senate Indian Affairs Committee is also a select committee, though the name select is no longer a part of its title.[1]

military industrial complex

A dependency relationship on military production by industry that benefits and encourages Congress to spend more money on military needs (US large arms dealer in the world)

DISCHARGE PETITTION

A device by which any member of the House, after a committee has had a bill for 30 days, may petition to have it brought to the floor. If a majority of members agree, the bill is discharged for the committee.

MEANS TESTED

A method for determining whether someone qualifies for a financial-assistance program. A common means test is the one used to determine eligibility for Chapter 7 bankruptcy. Means testing is also used in distributing Medicare benefits and has been suggested as a solution for the Social Security problem. welfare policy eligibility based on income level

zero based budgeting

A method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base" and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one. goal of cost benefit analysis ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organization, where costs can be first grouped, then measured against previous results and current expectations.

brinkmanship

A negotiating technique in which one party aggressively pursues a set of terms ostensibly to the point at which the other party in the negotiation must either agree or halt negotiations. Brinkmanship is so named because one party pushes the other to the "brink" or edge of what that party is willing to accommodate. As a sales strategy, brinkmanship is most often used with new customers and requires the salesman to identify and attack the customer's "pain points". escalates conflicts to brink of war

NAFTA

A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity between the United States, Mexico and Canada. NAFTA is credited with making it easier for Americans to purchase Canadian and Mexican goods, increasing workers' wages slightly in all three countries, increasing manufacturing and other jobs for U.S. workers, and dramatically increasing trade between the three nations, from $337 billion in 1993 to $1.182 trillion in 2011. In some ways, NAFTA has been less successful than hoped. Much of the NAFTA-driven investment in Mexico was in the form of maquiladoras (factories) in unpleasant border towns, and Mexican workers haven't experienced anticipated gains in wealth because of competition from Asian workers. NAFTA still imposes countless regulatory burdens on companies wishing to trade internationally and threaten administrative, civil and criminal penalties for violators.

regulatory agency

A regulatory agency is an independent governmental commission established by legislative act in order to set standards in a specific field of activity, or operations, in the private sector of the economy and to then enforce those standards. Regulatory agencies function outside executive supervision. Because the regulations that they adopt have the force of law, part of these agencies' function is essentially legislative; but because they may also conduct hearings and pass judgments concerning adherence to their regulations, they also exercise a judicial function—often carried out before a quasi-judicial official called an administrative law judge, who is not part of the court system. Regulatory agencies have become popular means of promoting fair trade and consumer protection as problems of commerce and trade have become more complex, particularly in the 20th century.

general schedule

1-18 levels with ten steps at each level used at federal govt level

RECESSION

A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession. Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession. The global recession of 2008-2009 brought a great amount of attention to the risky investment strategies used by many large financial institutions, along with the truly global nature of the financial sytem. As a result of such a wide-spread global recession, the economies of virtually all the world's developed and developing nations suffered extreme set-backs and numerous government policies were implemented to help prevent a similar future financial crisis. 2 or more quarters when GNP or GDP decline A recession generally lasts from six to 18 months, and interest rates usually fall in during these months to stimulate the economy by offering cheap rates at which to borrow money.

BALANCE OF PAYMENTS

A statement that summarizes an economy's transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country's residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The balance of payments classifies these transactions in two accounts - the current account and the capital account. The current account includes transactions in goods, services, investment income and current transfers, while the capital account mainly includes transactions in financial instruments. An economy's balance of payments transactions and international investment position (IIP) together constitute its set of international accounts.

CREDIT DEFAULT SWAP

A swap designed to transfer the credit exposure of fixed income products between parties. A credit default swap is also referred to as a credit derivative contract, where the purchaser of the swap makes payments up until the maturity date of a contract. Payments are made to the seller of the swap. In return, the seller agrees to pay off a third party debt if this party defaults on the loan. A CDS is considered insurance against non-payment. A buyer of a CDS might be speculating on the possibility that the third party will indeed default. The buyer of a credit default swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the debt security. In doing so, the risk of default is transferred from the holder of the fixed income security to the seller of the swap. For example, the buyer of a credit default swap will be entitled to the par value of the contract by the seller of the swap, should the third party default on payments. By purchasing a swap, the buyer is transferring the risk that a debt security will default.

GATT

A treaty created following the conclusion of World War II. The General Agreement on Tariffs and Trade (GATT) was implemented to further regulate world trade to aide in the economic recovery following the war. GATT's main objective was to reduce the barriers of international trade through the reduction of tariffs, quotas and subsidies. Formed in 1947 and signed into international law on January 1, 1948, GATT remained one of the focal features of international trade agreements until it was replaced by the creation of the World Trade Organization on January 1, 1995. The foundation for GATT was laid by the proposal of the International Trade Organization in 1945, however the ITO was never completed.

INDEXING

1. The adjustment of the weights of assets in an investment portfolio so that its performance matches that of an index. 2. Linking movements of rates to the performance of an index. 1. Indexing is a passive investment strategy. An investor can achieve the same risk and return of an index by investing in an index fund. 2. Examples of rates that could be linked to the performance of an index are wages or tax rates. tax rates linked to changes in consumer prices(index)

TARP

A government program created for the establishment and management of a Treasury fund, in an attempt to curb the ongoing financial crisis of 2007-2008. The TARP gives the U.S. Treasury purchasing power of $700 billion to buy up mortgage backed securities (MBS) from institutions across the country, in an attempt to create liquidity and un-seize the money markets. The fund was created by a bill that was made law on October 3, 2008 with the passage of H.R. 1424 enacting the Emergency Economic Stabilization Act of 2008. The Treasury will be given $250 billion immediately, and the President must certify additional funds as they are needed. The additional funds will be distributed as $100 billion, and then as the final $350 billion is given, Congress has the right to not approve the additional amounts. Global credit markets came to a near stand still in September 2008, as several major financial institutions, such as Lehman Brothers, Fannie Mae, Freddie Mac and American International Group, went under. In a few surprising moves, heavyweights Goldman Sachs and Morgan Stanley even changed their charter to become commercial banks, in an attempt to stabilize their capital situation. The bailout will attempt to increase the liquidity of the secondary mortgage markets by purchasing the illiquid MBS, and through that, reducing the potential losses that could be felt by the institutions who currently own them. In October of 2008, revisions to the program were announced by Treasury Secretary Paulson and President Bush; allowing for the first $250 billion to be used to buy equity stakes in nine major U.S. banks, and many smaller banks. This program demands that companies involved lose some tax benefits, and in many cases incur limits on executive compensation.

CONFERENCE COMMITTEE

A joint committee appointed to resolve differences in house and senate versions of the same bill work out differences in legislative bills from the house and senate prior to going to president for signature

CLOTURE

Cloture is a procedure used occasionally in the U.S. Senate to break a filibuster. Cloture, or Rule 22, is the only formal procedure in Senate parliamentary rules, in fact, that can force an end to the stalling tactic. It allows the Senate to limit consideration of a pending matter to 30 additional hours of debate. rule to limit time for debates in congress often imposed by rules comm.

DENTENTE

Détente was a permanent relaxation in international affairs during the Cold War rather than just a temporary relaxation (the so-called "thaw"). Detente is a term usually associated with the relations between America, Russia and China. The 1970's witnessed detente. Why? 1) The horrors of Vietnam shocked people. 2) There was a growing fear of a nuclear holocaust especially with the growth in those countries that had nuclear weapons. Also both USA and USSR had huge stockpiles of weapons. Why did all 3 major powers want to pursue detente ? China - she was fearful of her isolation in the world. She was also fearful of what USA had done in Vietnam. China's stockpile of nuclear weapons was a lot smaller than that of USA. China was also worried by her worsening relations with USSR. USA - she realised that there were better ways of containing communism than the ways that she done in previous years. She was also aware of the massive cost of weapons production and maintaining a huge armed force. A peaceful relationship with the USSR would be very beneficial to USA especially after the cost of the Vietnam War. USSR - USSR was spending a huge amount on weapons at the expense of basic household goods. Living standards were poor and USSR was also aware that her relationship with China was far from good while USA was trying to improve hers with China.

debt v deficit

Each year, a government (let's say the US Federal government for this example) takes in and spends money. financial term definition - debt vs. deficitThe government takes in revenues, or receipts, through income taxes, social insurance taxes, etc. The government also spends money every year (also known as outlays) on a variety of different things, including social security, defense spending, etc. etc. If the government spends more than it takes in over the course of one year, then it has run a deficit. A deficit applies to just one year. So, if the government takes in $10 trillion dollars but spends $13 trillion dollars in one year, then it has run a $3 trillion dollar deficit. When the government runs a deficit, then it must borrow money to make up the difference. A debt is completely different. Think of debt as accumulated deficits. If the government has to borrow money every year, then its debt will continue to grow year-after-year. This debt does not disappear unless the government elects to try and pay it down (rare occurrence). The debt usually grows year-after-year. With each additional deficit, the debt continues to grow. Some people think that if a government takes in more money than it spends in one year, then it suddenly doesn't have any debt. This is not the case. This simply means that the government has managed to run a surplus (opposite of deficit), but any accumulated debt is still there.

FISCAL POLICY

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. These two policies are used in various combinations to direct a country's economic goals. Here we look at how fiscal policy works, how it must be monitored and how its implementation may affect different people in an economy. Before the Great Depression, which lasted from Sept. 4, 1929 to the late 1930s or early 1940s, the government's approach to the economy was laissez-faire. Following World War II, it was determined that the government had to take a proactive role in the economy to regulate unemployment, business cycles, inflation and the cost of money. By using a mix of monetary and fiscal policies (depending on the political orientations and the philosophies of those in power at a particular time, one policy may dominate over another), governments are able to control economic phenomena. Fiscal policy is based on the theories of British economist John Maynard Keynes. Also known as Keynesian economics, this theory basically states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. This influence, in turn, curbs inflation (generally considered to be healthy when between 2-3%), increases employment and maintains a healthy value of money. Fiscal policy is very important to the economy. For example, in 2012 many worried that the fiscal cliff, a simultaneous increase in tax rates and cuts in government spending set to occur in January 2013, would send the U.S. economy back to recession. The U.S. Congress avoided this problem by passing the American Taxpayer Relief Act of 2012 on Jan. 1, 2013. Balancing Act The idea, however, is to find a balance between changing tax rates and public spending. For example, stimulating a stagnant economy by increasing spending or lowering taxes runs the risk of causing inflation to rise. This is because an increase in the amount of money in the economy, followed by an increase in consumer demand, can result in a decrease in the value of money - meaning that it would take more money to buy something that has not changed in value. Let's say that an economy has slowed down. Unemployment levels are up, consumer spending is down and businesses are not making substantial profits. A government thus decides to fuel the economy's engine by decreasing taxation, which gives consumers more spending money, while increasing government spending in the form of buying services from the market (such as building roads or schools). By paying for such services, the government creates jobs and wages that are in turn pumped into the economy. Pumping money into the economy by decreasing taxation and increasing government spending is also known as "pump priming." In the meantime, overall unemployment levels will fall. With more money in the economy and fewer taxes to pay, consumer demand for goods and services increases. This, in turn, rekindles businesses and turns the cycle around from stagnant to active. We'll Show You How To Turn 1K To 10K 100% Free If, however, there are no reins on this process, the increase in economic productivity can cross over a very fine line and lead to too much money in the market. This excess in supply decreases the value of money while pushing up prices (because of the increase in demand for consumer products). Hence, inflation exceeds the reasonable level. For this reason, fine tuning the economy through fiscal policy alone can be a difficult, if not improbable, means to reach economic goals. If not closely monitored, the line between a productive economy and one that is infected by inflation can be easily blurred. And When the Economy Needs to Be Curbed ... When inflation is too strong, the economy may need a slowdown. In such a situation, a government can use fiscal policy to increase taxes to suck money out of the economy. Fiscal policy could also dictate a decrease in government spending and thereby decrease the money in circulation. Of course, the possible negative effects of such a policy in the long run could be a sluggish economy and high unemployment levels. Nonetheless, the process continues as the government uses its fiscal policy to fine-tune spending and taxation levels, with the goal of evening out the business cycles.

QUANTATIVE EASING

Quantitative easing is defined as buying financial assets (eg. bonds) from banks via open market operations in order to flood them with reserves (read, cash in the vault) in hopes that they will lend it out and start a virtuous cycle of investment and consumption. This is a bit confusing, since it's unclear how quantitative easing is any different from what the Fed does in the normal course of its business. The main differences are that, with quantitative easing, the Fed is buying long-term rather than short-term bonds (as is done with typical open market operations) and that it has a money supply target rather than an interest rate target. In this way, quantitative easing is an attempt to lower longer term interest rates than those targeted in typical monetary policy. Quantitative easing comes with the same inflationary concerns as all expansionary monetary policy, and is in fact sometimes used as an attempt to combat deflation, which can have negative effects on an economy. Some economists believe that monetary policy can increase output and employment in the short run, but even they acknowledge that in the long run the economy will revert back to its original level and will have experienced increased inflation in the process. Other economists think that monetary policy can only trick people into producing and spending more if it comes as a surprise. Still others believe that monetary policy only results in increased inflation and has a negligible impact on real output, even in the short run.

ANTITRUST LAW

The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. Examples of illegal practices are price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power. NO CORPORATE MONOPOLIES OR PRICE FIXING Microsoft, ATT, and J.D. Rockefeller Oil are companies who have been convicted of antitrust practices.

DISCOUNT RATE

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank's discount window.

PRIME RATE

The interest rate that commercial banks charge their most credit-worthy customers. Generally a bank's best customers consist of large corporations. The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate which banks lend to one another. The prime rate is also important for retail customers, as the prime rate directly affects the lending rates which are available for mortgage, small business and personal loans.

GDP

The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP = C + G + I + NX where: "C" is equal to all private consumption, or consumer spending, in a nation's economy "G" is the sum of government spending "I" is the sum of all the country's businesses spending on capital "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports) GDP is Gross domestic product. For a region, the GDP is "the market value of all the goods and services produced by labor and property located in" the region, usually a country. It equals GNP minus the net inflow of labor and property incomes from abroad. A key example helps. A Japanese-owned automobile factory in the US counts in US GDP but in Japanese GNP.

MOODY AND FITCH STANDARD AND POOR'S

These allow you to provide loans, called bonds, to a company or even a country. Ratings companies, like Standard & Poor's, Moody's and Fitch's evaluate how likely it is the bond will be repaid. To insure a successful bond sale, borrowers must pay higher interest rates if their rating is below AAA. If the ratings are very low, they are known as junk bonds. Despite their risk, investors buy junk bonds because they offer a higher interest rate. Corporate bonds are loans to a company. If the bonds are to a country, they are known as sovereign debt.. Bonds issued by the U.S. government are Treasury bonds. Because these are the safest bonds, Treasury yields set a benchmark for all other interest rates. In April 2011, when Standard & Poor's cut its outlook on the U.S. debt, the Dow dropped 200 points. That's how significant Treasury bond rates are to the U.S. economy.