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madasafrog

Financially Literate?

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Its becoming a more commonly used term. Financially Literate, or Illiterate in some cases.

How would you class yourself?

How would you class people that are close to you and people that you know?

Its important as I feel their knowledge in finances effects us all. We all accept that politicians should have some financial understanding (George Bush can be exempt on this. As long as an autocue is there he should be OK. Pity they cant tell him what door to head for).

To make it easy.

scale of 1-10.

1 being that they can just about add up that a 20 hour shift at McDonalds earns them enough to buy more white lightening and monster munch

10 being that people stop coming to visit any more and wont take your calls

I ask the question as i am surprised on how many people do not know the basics of economics and even basic personal finance eg mortgages.

It all adds the lemmings/sheep argument!!!!

Edited by madasafrog

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I must be a (1) because I can only see three ways that a country gets richer:

1) Export more than it imports in true value

2) Provide more services abroad than you receive from abroad

3) Increase the value and yield of overseas investments

The balance of trade figures suggest that we're not doing too well on (1) and (2). I don't know much about (3) but the media seem to make a lot of noise about inward investment, which is the opposite - so I guess that it's not that wonderful.

Where is the new richer-making money coming from?

p-o-p

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I must be a (1) because I can only see three ways that a country gets richer:

1) Export more than it imports in true value

2) Provide more services abroad than you receive from abroad

3) Increase the value and yield of overseas investments

The balance of trade figures suggest that we're not doing too well on (1) and (2). I don't know much about (3) but the media seem to make a lot of noise about inward investment, which is the opposite - so I guess that it's not that wonderful.

Where is the new richer-making money coming from?

p-o-p

A country can become rich without any change in external trade, simply by being more productive at home. Not everything is trade. For example if the domestic power grid makes a lot of cost savings and passes this on to domestic consumers, everyone is better off without any change in trade / foreign investment.

Don't worry, though there is no danger of a productivity boom happening in the UK, it has one of the least productive workforces in the industrialised world.

It is shocking how politicians have mentioned "inward investment" as if it meant Japanese companies coming to the UK to build new car factories (as did happen in the early 90s for example). What has actually happened over the last 10 years is that a huge amount of existing assets have been sold off overseas; property, bonds, shares, debt. All that's done is inflate the value of the pound and mortgaged our future to overseas investors.

frug.

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Before I found this site three years ago, 1:10.

Now, 7:10.

I don't know the intricacies of derivatives markets but I now know how controlled and manipulated the general public are.

People are deliberately kept from understanding one crucial aspect of life - what money really is. They are conditioned from birth to see life in two dimensions from a distance of six inches.

Because we don't understand money and the people who control it, we see the world, society and all it's problems and try to address them individually. This makes these issues appear to be endless, confusing, complicated and creates the desired feeling of helplessness, keeping us apathetic.

We are preoccupied with our own feelings of inadequacy, status anxiety, perpetuated through advertising and the covert tyranny of should. Content to find our own arbitrary segregated identity and uniform individuality.

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Very interesting question - I'm going to cite my father here. He earns more than I do, and is very well respected and pretty successful in his job in the commercial department of a multinational. To quantify where I'm coming from as the scorer, I should say that I have learned more from this site in the past 3 years (despite my registration date) than I have from any other source. I'm also aware that the posters I have learned from here range from casual armchair economists to all-out-nutters.

I give my father a 4/10.

I'm basing my father's score on his knowledge of the credit crunch, how he understands it, and what he's doing to secure himself against it. That score is based on the fact that his main sources of information are the BBC and other people from his work.

I should add that I'm really in no position to be authoritatively handing out a score when my own knowledge is at best limited. However, I've been surprised at the shallowness of his understanding, his willingness to accept as fact the opinions of work mates, and his overriding opinion that "the government (who he hates) will sort it all out".

Of course, it may be that I am entirely wrong, and have spent the last month moving money about and stressing over a storm in a teacup. I'm happy to accept that I may be wrong, and that in 12 months time he could be scoring me a 3/10 with "impetuous" in red biro next to it.

Good thread though :P

Edit - Feck, I forgot to score myself. THB I really don't know, but on what I've written above I guess it would have to be higher than 4. I'll go for 5.5 with the caveat that it might be me who is wrong not the old man.

Edited by Crash Gordon

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I must be a (1) because I can only see three ways that a country gets richer:

1) Export more than it imports in true value

2) Provide more services abroad than you receive from abroad

3) Increase the value and yield of overseas investments

The balance of trade figures suggest that we're not doing too well on (1) and (2). I don't know much about (3) but the media seem to make a lot of noise about inward investment, which is the opposite - so I guess that it's not that wonderful.

Where is the new richer-making money coming from?

p-o-p

That is the mercantilist view of world trade that leads to trade barriers and everyone getting poorer. It is not correct to see a country as a box of marbles that gets richer and poorer as marbles are added and removed. Exports factors are not to be ignored and may be the overiding factor for some countries (e.g. China), but they explain one element of an economy, that must be considered in light of the others,

E.g. 2 marbles are removed from the box, but 3 new marbles have been created by the other marbles in the box, leaving me one marble up. Therefore, I am not losing my marbles.

We actually get richer by concentrating on what we do best and freely trading our produce with others who have concentrated their activities on what they do best.

Japan and Germany have managed to maintain significant trade surpuses over the years of recessions and poor performance without getting any richer. Other countries with deficits did manage to expand their GDP.

Do I get a 2?

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Before I found this site three years ago, 1:10.

Now, 7:10.

This.

Although I'm not sure I'd venture as high as 7. I do find all this stuff strangely fascinating though.

I was rummaging through some of my old files last night and found some statements from 1999-2001. I thought I was so clever using the interest free overdraft on my HSBC student account and moving the balance into the twinned 'savings' account. So I got something like 0.5% interest instead of 0.01% interest. I did the same with my student loan payments too. What a waste. What a numpty. :P

Further idiocy points for not using my cash ISA allowance at all, ever, before 2006 (incidentally when I joined HPC). I somehow managed to open myself a stocks and shares ISA and Egg savings account (when they were good) back in 2002 though.

As for my family... Eyes generally glaze over when I excitedly try and explain some new piece of financial apparatus I've just learned about or some 'big news' in the economy. I tried to explain the concept of going 'short' on a company to my dad last month - don't think I quite got it across. He did manage to fight my corner very well though when the perennial 'why won't christh buy a house' thing came up with my grandma last month. I was impressed because I hadn't moaned about housing things for quite some time :P yet he seemed to understand the situation for FTBs really well.

I don't understand my grandma though, she was stuck in Droylsden for years and years after the 90s crash, she desperately wanted to move down south to be closer to us, but she couldn't sell... How many crashes has she been though? She lives in Germany half the year so she must realise how loony the prices are here - she admits that she couldn't afford to buy the flat she lives in now in Bexhill. :huh:

Just to reinforce that, my German friend came to stay with me for a few days the other week - totally unaware that housing is my 'favourite' topic - he asks me if I'd seen the CRAZY prices of the houses in the EAs on Lewes Road. Have I ever. :rolleyes:

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Its becoming a more commonly used term. Financially Literate, or Illiterate in some cases.

How would you class yourself?

How would you class people that are close to you and people that you know?

Its important as I feel their knowledge in finances effects us all. We all accept that politicians should have some financial understanding (George Bush can be exempt on this. As long as an autocue is there he should be OK. Pity they cant tell him what door to head for). If the general public are so dim the

To make it easy.

scale of 1-10.

1 being that they can just about add up that a 20 hour shift at McDonalds earns them enough to buy more white lightening and monster munch

10 being that people stop coming to visit any more and wont take your calls

I ask the question as i am surprised on how many people do not know the basics of economics and even basic personal finance eg mortgages.

Sorry, don't understand the question. What are you on about?

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As for my family... Eyes generally glaze over when I excitedly try and explain some new piece of financial apparatus I've just learned about or some 'big news' in the economy.

:lol::lol:

Me too - I tried to explain to my father last night about shorting (one of the few SM tricks I can actually understand). He nodded in all the right places, but I could see the eyes glazing over.

What's annoying is that I can see him thinking "What's the stupid boy on about now?". Then again, I have to be grateful that my wife not only listens, but understands why we don't currently have a house, and agrees with the reasons for it. I can cope with my father thinking I was the one who used up all the tin foil, but not my wife ;)

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Just to reinforce that, my German friend came to stay with me for a few days the other week - totally unaware that housing is my 'favourite' topic - he asks me if I'd seen the CRAZY prices of the houses in the EAs on Lewes Road. Have I ever. :rolleyes:

LOL. I can imagine the reaction of some poor innocent German on walking past a British estate agent's window. They must think they've landed in a parallel universe.

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Sorry, don't understand the question. What are you on about?

Its quite broad in its question.

How knowledgeable on finances and economics are we ourselves?

How would you rate yourself?

How would you rate your friends, family, etc etc?

Its a broad question but the point i am trying to make is how financially inept is the general public towards economics and their own finances. You could argue that economics and personal finances are different subjects but we all know they are closely linked.

There are a lot of people on this site that are quite knowledgeable on the "science" of economics which put most people to shame. Those people appear to be very bearish. If the average joe knew what they knew, would all markets be in freefall already?

Apologies for the poor grammar. It comes with an education from a local comp.

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Its quite broad in its question.

How knowledgeable on finances and economics are we ourselves?

How would you rate yourself?

How would you rate your friends, family, etc etc?

Its a broad question but the point i am trying to make is how financially inept is the general public towards economics and their own finances. You could argue that economics and personal finances are different subjects but we all know they are closely linked.

There are a lot of people on this site that are quite knowledgeable on the "science" of economics which put most people to shame. Those people appear to be very bearish. If the average joe knew what they knew, would all markets be in freefall already?

Apologies for the poor grammar. It comes with an education from a local comp.

I didn't understand the bit about people not coming to visit and not taking your calls.

What's the connection between people taking your calls, and financial literacy??

I don't think any of us are quite as clever as we think.

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People are deliberately kept from understanding one crucial aspect of life - what money really is. They are conditioned from birth to see life in two dimensions from a distance of six inches.

Because we don't understand money and the people who control it, we see the world, society and all it's problems and try to address them individually. This makes these issues appear to be endless, confusing, complicated and creates the desired feeling of helplessness, keeping us apathetic.

We are preoccupied with our own feelings of inadequacy, status anxiety, perpetuated through advertising and the covert tyranny of should. Content to find our own arbitrary segregated identity and uniform individuality.

Fantastic post, you really have a way with words.

I'd give myself an 8, my family a 6 maybe, they agree that the housing market is fcuked,

but don't agree that investing in krugerrands, tinned food, and a shotgun is a good idea, fools.

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Me: 8.5/10 Built fully owned business from scratch (with very small debt of £1500 now paid up) no mortgage

Mother: 7/10 Starting a business, no loans, no mortgage but very small CC debt(<£1000)

Grandparents: 9/10 Old fashioned saving lots, spending little no mortgage

Other relatives: from 4/10 to 7/10 A couple owning property outright, some not to indebted no mortgages

Friends: from 1/10 to 4/10 Mostly indebted, some heavily unfortunately... BTlers, aspirationals, some unlucky

Boss: 8.5/10 Me.....lol no debt and with assets

I'm lucky to have a close family that supports eachother and talks about these things. We are all quite wary of the money system and are quite modest so not really fashion junkies or quickcash players. Some friends are in some serious crappola though, one managed to be saved in the nick of time, one with talent but the system bu*gered them and one has a BTL empire thats going down as hard as an epileptic elephant :blink:

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It's an important question - thank you for raising it. I would put myself at about a 4 - I can grasp the broad brush stuff but dont ask me to explain the ins and out of markets, bonds, subordinations etc.

But many many people I have realised do not even have a basic understanding of economics. In fact for most people it doesn't really matter a great deal if they don't understand complex economics. But they should understand the basics - like if you borrow some money the chances are you will have to pay back more because the lender will (ahem) want to charge you for this privelege. There are many people, believe me, who don't even grasp this fact.

I remember listening a while ago to feedback from a survey of 18 year olds about APR's - the survey handed out a variety of cards with varying APR's and asked the participants to name their choice- the card with the highest APR came top. The reason was that they thought a high APR was a good thing!

So for all you Adam Smith advocates envisaging an population making educated rational choices - forget it!

It is a scandal that it is only now that the National Curriculum includes financial education. Most kids leaving school now thingk APR is a football team.

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I remember listening a while ago to feedback from a survey of 18 year olds about APR's - the survey handed out a variety of cards with varying APR's and asked the participants to name their choice- the card with the highest APR came top. The reason was that they thought a high APR was a good thing!

So for all you Adam Smith advocates envisaging an population making educated rational choices - forget it!

It is a scandal that it is only now that the National Curriculum includes financial education. Most kids leaving school now thingk APR is a football team.

This is the prime problem. To many people, the basics of personal finance are a case of "can i pay my bills each month and have i got cash in pocket". They are not aware of how their own mortgage works and how their savings work. A lot of people wont understand that their savings earning 4% are not actually earning them anything after inflation and tax.

They will not also understand the basics of "boom and bust" in an economy. To them, something has gone wrong for the economy to go into recession. When gordon brown says "no more boom and bust", what % of the sun readership has any clue what he is talking about?

The basics of finance are some things we take for granted. However, when a large majority only asks about it when they look at their bank statement and says "why has my mortgage increased by £200?", it says a lot about the general public

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The bottom line is that we have a ruthless, and extremely intelligent elite that deliberately create these booms and busts to deprive the ignorant masses of the accumulated value of their labor.

The less wealth people have the less likely they are to threaten TPTB.

A hierarchical society depends on maintaining a huge ignorant underclass,

that is a quote from Orwell I think.

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The bottom line is that we have a ruthless, and extremely intelligent elite that deliberately create these booms and busts to deprive the ignorant masses of the accumulated value of their labor.

The less wealth people have the less likely they are to threaten TPTB.

A hierarchical society depends on maintaining a huge ignorant underclass,

that is a quote from Orwell I think.

It does seem odd that financial education has not been a priority - anyone would think that the government wants a population which is financially ignorant but with access to unlimited funds from banks financed by low interest rates and irresponsible lending because the banks know they have already securitised the debt. err. umm. No surely that can't be right. Um.

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Its becoming a more commonly used term. Financially Literate, or Illiterate in some cases.

How would you class yourself?

How would you class people that are close to you and people that you know?

I have recently heard things which have shocked me about peoples knowledge and views on finance.

In discussing shares, it became apparent that some of my colleagues do not know what PE ratio is. To my way of thinking, you must know this to have any opinion about share prices. If you were offered brocolli for £1, you need to know whether you will get a kg, a box full, or just one sprig. PE tells you how much earnings you will get for the price of a share. Of course there is much more you need to know, but then the box full of brocolli for £1 is a poor deal if it has all gone mouldy. But these are people who get share options from their employer and make decisions about if and when to exercise them.

In a separate discussion, it was clear that there was a widespread belief that the actual price of one share was of great importance; i.e., £1 shares were much better than penny shares. I know of a company that had a 100 for 1 share consolidation which converted the share price from a few pence to a few pounds overnight. The discussion on the message boards about this indicated that many people think similarly.

Mathematics is now considered to be very "un-cool". As a maths graduate I may be biased but I think you need to manage numbers to manage money. On a BBC Money Box special on share buying, an interviewee was trying to decide whether to buy shares or pay off her mortgage. In the end she chose the latter to get a "clean slate". I would have hoped that the program would have made the point that repayment of debt is a risk-free, tax-free investment; whereas shares are risky and taxed, so you would have to have an expectation of gain from the shares of well above your mortgage rate to make the gamble worthwhile. But no, the program was entirely maths-free. The interviewee may have made the right decision, but the program did nothing to de-mystify the issue.

Thing is though that however contrary to logic these views seem, these people comprise the market, and their buying and selling decisions affect the share prices just as much as the the most sophisticated fund manager. This aspect of markets becomes crucial to those that have STRed at various points in the inflation of the housing bubble: they do so because their analysis of the 6X or 10X avarage house price tells them to, but if the rest of the market doesn't act on these mathematical observations, then it won't follow the prescribed route.

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A lot of people wont understand that their savings earning 4% are not actually earning them anything after inflation and tax.

I don't think the people I am thinking of would have savings! To save money is a competely foreign prospect. Let alone worry whether they are earning any interest on them. I am sorry but in the real world hardly anyone under 40 has savings any more. It is hard enough paying the mortgage and the bills. No-body saves for gods sake!

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Guest Bart of Darkness

For myself I'd say about 5-6. I feel I've learned a lot since coming here but that there's still a long way to go.

Some of my mates I'd rate in minus values! Most I'd rate 1-2 (where I was 2 years ago basically).

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Guest pioneer31

I'm about 6-7. You don't need to be an Economics expert to get through life unscathed, if you understand the fundamentals, boom, bust, functions of supply and demand (which sadly many people don't).

I'm amazed at how many still believe in the 'free lunch' idea - that their house is a magic wealth generator. Where do they think the money is coming from?

Edited by pioneer31

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I don't know if anyone on here knows this, but how many people in the UK actually study economics in school? I'm an American (and an economics major) and I'm not all that familiar with the British educational system (lucky, perhaps?). In the US, probably a little under half of all college graduates (40% of the population) end up taking a course in economics, so maybe 15%-20% of the population in whole have had exposure to the basics. From reading sites like this (and the current popularity of BTL investments), I get the feeling that this number is lower in the UK.

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