Dot-com Bubble

Related terms:

• Fed
  

  The Federal Reserve System, or sometimes referred to as “the Fed” is the central bank of the United States. The agency was created through the House Resolution 7883 by Rep. Carter Glass and it came into effect on December 23, 1913 after President Woodrow Wilson signed the Federal Reserve Act. The Fed is entrusted with the responsibility of ensuring that the country will have a safer, more stable, and flexible financial and monetary system.

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• Fiscal Policy
  

  Fiscal policy is an economic policy which uses government spending and taxation to influence the economy. It is the sister of monetary policy conducted by central banks to affect a nation’s money supply. The fiscal policy influences aggregate demand by changes in the level of taxation and government expenditure. We say that fiscal policy is loose or expansionary when spending is higher than revenue (i.e., the budget is in deficit). On the other hand, fiscal policy is said to be tight or contractionary when revenue is higher than spending (i.e., the government budget is in surplus).

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• Gold as an Investment
  

  Gold had served as money for thousands of years until 1971 when the gold standard was abandoned for a fiat currency system. Since that time, gold has been used as an investment. Gold is often classified as a commodity; however, it behaves more like a currency. The yellow metal is very weakly correlated with other commodities and is less used in the industry. Unlike national currencies, the yellow metal is not tied to any particular country. Gold is a global monetary asset and its price reflects the global sentiment, however, it is mostly influenced by the U.S. macroeconomic conditions.

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• Interest Rates
  

  In economics, an interest rate is the ratio in the mutual valuation of present goods against future goods. Since people prefer goods now to later, in a free market there will be a positive interest rate to reward deferring consumption. From the financial point of view, an interest rate is a rate at which interest is paid by borrowers (debtors) for the use of money that they borrow from lenders (creditors). To simplify, an interest rate is the cost of borrowing money, typically expressed as an annual percentage of principal.

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• Monetary Policy
  

  Monetary policy is an economic policy which aims to achieve macroeconomic goals such as low inflation, low unemployment, high economic growth and financial stability. The second major macroeconomic policy is fiscal policy conducted by governments. Monetary policy is usually conducted by independent central banks.

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• Precious Metals
  

  A precious metal is defined as a rare, naturally occurring chemical element that has high economic value and is chemically resistant. In the past, precious metals served as a currency. Now they are an investment or industrial commodity.

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• Price bubble
  

  There are a number of ways to define a price bubble (also referred to as a speculative bubble, economic bubble, asset bubble or financial bubble). The simplest definition says that a price bubble is an upward deviation of the market price from the asset’s fundamental value. In other words, the bubble means an upward price movement over an extended range which then implodes.

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• Safe Haven
  

  A safe-haven asset is an asset that is uncorrelated (weak safe-haven) or negatively correlated (strong safe haven) with another asset or portfolio in times of market stress or turmoil. It should not be confused with a hedge, which is an asset that is uncorrelated (weak hedge) or negatively correlated (strong hedge) with another asset or portfolio on average. Hence, a safe-haven asset protects investors during crises, unlike a hedge, which protects them in normal times, but not necessarily during turmoil. Thus, a safe-haven asset is expected to retain its value or even increase its value in times of market turbulence, when most asset prices decline.

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