The central banks are also cutting interest rates to try to boost banking profits, and this is making currencies such as the dollar increasingly unstable.

That is such a key point I cannot overstate it. The Federal Reserve, contrary to what you might think, is actually a consortium of mostly privately owned banks making decisions affecting the monetary policy of the United States. I recommend thoroughly reading through the Wikipedia article I linked to to gain a real understanding of how the system actually works, and how every single dollar printed by the reserve is actually loaned to the United States Government.

When the interest rate is cut it tends to both increase inflation and decrease the value of the dollar, and that is precisely what is happening. If one takes a look at the Consumer Price Index, it is clear that inflation has been steadily increasing. According to the Department of Labor’s statistics, the Consumer Price Index has risen by 4% over the past year. The Euro has risen from being worth around $1.33 a year ago to $1.56 today.

Things are bad, but they could be worse. The Fed needs to hurry up and slow down. Try keeping interest rates at least stable for a little while longer, which will hopefully reinvigorate the dollar and keep inflation low. This will allow the American consumer to retain some of its spending power. It’s going to be a rough 2008 but let’s ride the rapids, hang on tight, and hope for the best! Till next time!

Northern Rock is Britain’s fifth biggest mortgage lender, but customers on both sides of the Irish Sea began to withdraw savings en masse after the Bank of England bailed out the bank. The level of withdrawals was high, with a reported £1 billion taken out.

The bank has been promised money by the Bank of England, but that still did not help calm nervous customers. The reason behind all of the mess? Yes, you guessed it, the collapse of the subprime mortgage market in the United States. Somehow, someway, the subprime debacle still manages to unsettle financial markets worldwide. In this case, the bank was unable to raise sufficient cash to cover all its positions after the credit market was tightened due to the subprimes.

Northern Rock relied on capital markets over customer deposits more than most banks for its financing, and that policy decision came back to bite the bank. (in a big way. ouch.)Estimates are running between 3 and 4 billion with a B dollars having been withdrawn from the bank within the past week alone. Not only that, but shares in Northern Rock’s stock dropped 40% and then spread fear over to other banks like Llyod’s of London.

The lessons I would draw from reading about this would be: never trust any one bank to “do the right thing”. Spread your cash across multiple institutions and therefore protect yourself from the failure of any one bank or agency. In the United States, your deposits are FDIC insured only up to $100,000. Beyond that and you should split the amount up anyway just for your own protection. (Think it can’t happen here… you’re wr-o-ng)

** UPDATE: Now, even the New York Times has run a story on the impending demise of the bank. Now that the mainstream media has picked up the story, just watch everyone scramble to their computers to look up what they just read through the Times or heard on T.V. I just wish sometimes it would be the other way around.

To hold you over, I’m linking to three personal finance related carnivals that provide a wealth of information. Take some time out of your busy day and just read a little bit; you never know what you might learn!

The first is the Carnival of Personal Finance #103, hosted over at Cleverdude. He frames the carnival as if it were an episode of the television series 24. Interesting, although I’m not much a fan of the show. In fact I don’t really watch much television.

The next carnival is the 90th Carnival of Debt Reduction, hosted over at No Credit Needed. Debt reduction is a very critical topic insofar as carrying debt reduces your ability to save and invest your hard earned money!

The third carnival is the Festival of Frugality number 77, hosted at My Two Dollars. Frugality is something I practice and preach to all of my friends – see what you can do to try and keep your costs down!

companies at the top 20% of the the American Customer Satisfaction Index (ACSI) greatly outperformed the the stock market, generating a 40% return.

The study starts out by stating that it has found a strong relationship between customer satisfaction and market value of an equity. That basic assumption does make sense; if customer’s weren’t satisfied with a particular company, factors such as word of mouth spread by the Web would start to undermine that company’s sales. That gradual reduction in sales because of a persistent lack of customer satisfaction would then begin to negatively affect the stock price of that company. The confusing part of it all, to me anyway, is what exactly constitutes a happy customer? It means different things to different people, and each industry.

After asking that question, I decided to go poke around the American Customer Satisfaction Index’s web site, in hopes of better understanding how it maintained its listing and what got a company into the top 20% of the index. According to the methodology page, the ACSI is compiled by

The American Customer Satisfaction Index uses customer interviews as input to a multi-equation econometric model developed at the University of Michigan’s Ross School of Business. The ACSI model is a cause-and-effect model with indices for drivers of satisfaction on the left side (customer expectations, perceived quality, and perceived value), satisfaction (ACSI) in the center, and outcomes of satisfaction on the right side (customer complaints and customer loyalty, including customer retention and price tolerance).

(Check out the Methodology page for more info)

So it’s econometrics – which I was informed was the most hated of all economics classes as a college student! Either way while I would certainly agree that higher customer satisfaction is one element that can help a company to isolated itself from its peers and stand out; I’m not sure if that’s going to always lead to higher stock prices. I certainly wouldn’t make an investment modeled after that idea.. it’s too easy to look back at what happened and find reasons for it, and there’s no guarantee this reasoning will hold up in the future! But you should really read the study for yourself and decide…

Here is a link to the study in PDF if you want to read it for yourself!

To start us off, check out the 96th Carnival of Personal Finance, hosted at JLP’s blog, AllFinancialMatters. He graciously included my post entitled How to obtain your credit report for free. The personal finance carnival was the first carnival I regularly started reading, and is always chock full of great information. Some highlights include: Queercents’ post entitled Spendthrift Nation: Drowning in Debt and Saving Simply’s discussion Getting a big tax refund this year? Some things to consider.

The next three carnivals all accepted my article, Using Web 2.0 for career development. The first is Personal Growth Carnival #37, hosted by Bryan C. Fleming. The personal growth carnival is another fabulous carnival and I encourage you to read it weekly. Try perusing Albert over at The Urban Monk’s post, Happiness: How to maximise pleasure and joy is a great example.

Next up is Carnival of Entrepreneurs #19, hosted by Roberto Alamos. Check out Tools for Negotiating with the Goliaths of the World at the Alexander Report.

And finally, we have the April 21st edition of the Carnival of Career Intensity, over at David V. Lorenzo’s Career Intensity site. It’s a small carnival, but I thought the article by Dave Prouphet on How to resolve conflict in the Workplace was wonderful.

Take some time out of your hectic day and try and learn a little bit – it’ll help you in the long run, I promise!

What is your credit report?

Your credit report is essentially a compilation of your credit history, including such things as all the credit you have applied for, money you owe, and bills you haven’t paid. The information is compiled from information supplied by banks, various merchants, and any other creditors. The FTC (Federal Trade Commission) is the government agency who has forced the credit agencies to set everything up so that consumers can check their credit reports for free. The bottom line is that everything is now golden, and consumers need to take advantage of this opportunity to make sure their credit is correctly being reported. The website that has been setup is called www.annualcreditreport.com, and it is the ONLY site that you can use to get the report for free. You’ll see ads on television for freecreditreport.com and a few others, but they don’t offer completely free services (free credit report tries to get you to sign up for their credit monitoring service (which costs money) before they give you access to your free report).

Who manages your credit report?

The three major credit agencies are Equifax, Experian, and TransUnion, and they are sponsors of annualcreditreport.com. They have information on millions of Americans, and have great impact on many different aspects of your life (Nervous? I would be). You are allowed to obtain your free report once every 12 months from each of the agencies. What I do is stagger my free report orders, so that every four months I rotate between the agencies. For instance, I’ll order my free report from Equifax in January, Experian in May, and TransUnion in September. This way you’ll have more chances of picking up a mistake or a case of identity theft. If you have an aversion to ordering using your computer, you can call a toll free number to order the report, 1-877-322-8228.

Your credit score

The last thing to understand is the difference between your credit report and your credit score. Your credit report is freely available, but your credit score will cost you about $8. The report is a listing of outstanding debt, credit taken, and bills while the score takes all that information and uses a complicated formula to come up with one specific score. Most people’s scores are in the 500-800 range. Obviously the higher your score, the better rate you’re going to get on a loan and the more credit-worthy potential landlords will view you.

Ordering your credit report has been made easy, and it’s something everyone should do regularly. I hope this post has helped make clear what can sometimes be a complicated subject. Order your report today, and be sure to recognize any errors or attempts to steal your identity as quickly as possible. To clear those up you’ll have to call the agencies directly and inform them of the error – that’s a long process, which is why you should be checking your credit report regularly so you can begin to fix things right away if necessary. Has anyone ever found a mistake on their credit report?

The book has 23 chapters and weighs in a little under 300 pages; not a one-day read but maybe a couple weekends would get the job done. There are the usual sections found in all financial books such as Asset Allocation, Diversification, Saving, Index Investing, etc. Where this book really shined are the discussions of taxes as they relate to investing and retirement planning. There are two whole chapters (Taxes part 1 and 2) dedicated to the topic, more so than most of the other financial books I have read. Of course, this may sound boring beyond belief, but taxes play an important part in determining just how much of that money you saved you actually get to keep. Another great section is saving for college, which clearly goes over the various vehicles that are available to both parents and kids to help save for a college education. I hadn’t even realized the plethora of options available; I’m sure my parents wish they had known about all these options before I went to college. (Too late! And UC Santa Cruz will never be the same!)

In the end, if you have more than a little interest in the DIY approach to managing your money, this book will be a wonderful resource and a great read. It’s not made for a great rich quick persona, rather for someone who understands that saving money and prudently investing it over a lifetime can easily turn you into a millionaire! (Like me, for instance). Don’t expect witty writing and funny prose; the writers present the information very matter-of-factly. Take the time to read and re-read this book and you’ll be much better off than before you had read it – and that’s my definition of a good book about investing.

The Bogleheads’ Guide to Investing

(Yes I make a few bucks if you buy the book – help a brotha out!)

Well I’ll tell you! If you’re not making more money each year, you’re going to be able to purchase fewer and fewer goods and services due to inflation. Inflation eats away at money’s purchasing power, and while inflation has hovered at figures between 2 and 3 % over the past few years, it certainly is having an affect. So if you need more money to purchase needed items, but you’re not earning more money, what are you going to turn to? If you said credit cards, then you’re just like most of America.

Credit card debt has been rising astronomically, with Wolff quoting figures that say 1 in every 7 dollars goes towards paying debt. In the same show during a later interview with Naomi Prins, Naomi mentioned that consumer debt has tripled in the last 10 years. Even worse, in 2005 Congress passed a bill designed to make it harder for consumers to file for bankruptcy, called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. You can see how all of this wage stagnation and inflation can start a snowball effect that just gets worse and worse. This is a big reason why our lives are filled with so much stress and anxiety. America currently has the dubious distinction of having an extremely high divorce rate, between 40 and 50% of all marriages. One big reason could be the lack of purchasing power coupled with ever increasing debt placing undue hardship on relationships.

So what is there to do about all this rising debt, rising inflation, and not rising income. In my view, there is one solution that would dramatically help the American people: a solid financial education being made a required part of a high school curriculum. Too often, we are forced to sit through classes in high school that have absolutely no bearing on our future lives. I believe a simple one semester financial education on the basics of saving, taxes, loans, and other basic financial concepts would enormously help our children become familiar with important concepts in regards to money and not make the same mistakes we have. Simple lessons, such as don’t spend more with credit cards than you can afford to pay off each month, or it’s better to save up and buy your car outright instead of leasing it, could have a dramatic impact on the financial future of our younger generation.

Now this would obviously be hard to get approved by politicians, simply because it would be against the interests of the major credit card companies and banks, who all spend millions of dollars lobbying Congress to have their views known. Nobody said change was easy. However, in the long run, it could make a big different for a lot of people. Even if schools refused to setup this sort of class, perhaps a course could be initiated online that would be designed by the workers of America and whose children could participate for free. Maybe the next big website will be a collaborative learning center for children designed to make finance fun. What do you think?