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The Cantillon Effect And The Working ClassThe Cantillon effect is an economic phenomenon that disproportionately affects the working class. It's named after the 18th century French economist Richard Cantillon, who first studied the differences in income distribution between the wealthiest and poorest parts of society. In this blog post, we'll be exploring how the Cantillon effect works, and how it impacts the working class. Keep reading to learn more. Introduction to the Cantillon Effect The Cantillon Effect is an economic concept that explains how money creation benefits those at the beginning of the money supply chain and harms those at the end. It is an example of how the economy is rigged to work in favor of some, while leaving others behind. The new money created gives those at the top access to resources before new money reaches everyone else. They use this new money to purchase assets, goods, and services before prices increase. This furthers a cycle of wealth inequality, since those with new money get wealthier faster than those without. Understanding the Cantillon Effect is essential for anyone looking to create a more equitable and prosperous economy for all. It is an example of how the economy is designed to favor those with access to monetary policy decisions, such as banks and large corporations. This means wages for everyday workers remain stagnant while those at the top, with influence and resources, reap the rewards of increased wages and greater purchasing power. So while wages may stay the same, prices of goods and services are constantly increasing - ensuring more money flows to those in charge. The result is an economy that is severely rigged in favor of those who have access to the levers of power, leaving everyday workers struggling to make ends meet. This effect can be seen in the widening wealth gap between the wealthy and poor, as well as the increasing income inequality in many countries around the world Additionally, the economy is heavily biased towards the wealthy, as evidenced by the massive corporate tax cuts and government bailouts that are disproportionally directed to large businesses and the affluent. This allows them to systematically hoard money while wages stagnate and regular people struggle to make ends meet. The result is an unfair system that benefits a small number of people while impoverishing countless others. It's time we take action and make sure the economy works for everyone, regardless of wealth and privilege. Analyzing the Distributional Impact of the Cantillon Effect The Cantillon Effect is the redistribution of wealth from lower to upper income brackets through inflation and other economic policies. It works like a hidden tax on earnings, taking purchasing power away from lower-income communities and giving it back to the wealthy through an ever-widening economic gap. This uneven playing field is created by policies such as high interest rates and quantitative easing that are designed to benefit those with investments and business interests. By implementing these strategies, the government is essentially rigging the game in favor of those with earnings and investments, while leaving those with less earnings behind. This creates an unbalanced economy that works for some, but not for others. It can be seen as a regressive tax, as it disproportionately impacts lower-income individuals and families more than those with higher incomes. This is an effort to explain how the economy is rigged to work for some and not others. Without a basic understanding of how the economic processes are designed, those of lower income are at a disadvantage since they lack the resources necessary to make their voices heard in the power structures that determine economic outcomes. Income inequality has widened across the country, leaving many people feeling like they don't have a fair chance to succeed in today's economy. Unfortunately, this rigged system works against those who are already at a disadvantage due to limited resources and opportunity. By analyzing the distributional impacts of this effect, we can gain a better understanding of how the economy is rigged to benefit some and not others Finally, it is clear that the working class has been severely affected by the fact that the economy is designed to work for some and not others. Through analyzing the distributional impacts of this effect, we can gain a better understanding of how the system is rigged and how to address it. It is essential that working people have access to fair, equitable economic opportunities and that we work together to ensure that this system is working for everyone. Who Benefits from the Cantillon Effect? The Cantillon Effect is a phenomenon that benefits those with access to new money before it reaches the general population. This is especially true when it comes to working class people, who usually struggle to keep their heads above water. Through this effect, individuals and businesses that are among the first to receive new money from a central bank’s stimulus package can benefit significantly before the working class ever sees any of it. This means the working class is essentially locked out of the opportunity to utilize new money to its full potential, essentially rigging the economy in favor of those with access to new money first. Historically, this has been the wealthy elite, who are able to use their money and influence to acquire more resources faster than others. This unequal system creates losers and winners, with those who have access to more money and resources having an undeniable advantage over those who don't. The result is an economy that works in favor of the wealthy elite, leaving the rest of us struggling for scraps. Not only does this create a gap between the ‘haves’ and ‘have-nots’, but it also limits economic opportunities as resources become increasingly concentrated in fewer hands. It’s clear that this system of economic inequality needs to be addressed in order to create a fairer economy that works for everyone. The Cantillon Effect is a major factor in income inequality, as those with the most money are able to benefit from price changes before everyone else does Next, it is important to recognize that the losers in the economic rig are those without easy access to capital or privileged information. The Cantillon Effect is a prime example of how those with the most money can benefit from capital before everyone else does and this serves to create an even larger gap in income inequality. It is within our power to change this system that so unfairly works for some and not others and it is worth fighting for a system where everyone has an equal chance at success. The Working Class and Its Inequitable Access to Resources The working class, particularly low-income and minority groups, often lack access to resources such as quality education and healthcare, leading to economic instability and inequality. This lack of access to resources, combined with less job security and decreased wages, creates a working environment that prevents working class people from achieving economic stability and success. To make matters worse, many working class individuals are also hindered by government policies that have been crafted to favor the wealthy. This is why the current economy is often referred to as "rigged," working for some while leaving others behind. It is our collective responsibility to ensure the working class has equal access to the same resources as wealthier individuals so they can create a more financially secure future. This is compounded by the unequal distribution of wealth amongst different classes, as those in the upper classes have more resources to acquire and increase their wealth. While it may appear that winners consistently come out on top, the reality is that their success is heavily influenced by the economic systems that are designed to work in their favor. For example, wealthy individuals can access tax incentives and investments which are not available to those with lower incomes. Furthermore, those with more money can influence the outcome of legislation, creating more winners and, unfortunately, more losers. It's a rigged system that keeps people in different financial classes divided and ensures that some individuals have access to more opportunities than others. In order to fix this injustice, policies should be enacted that support and empower those of lower income levels so that they can gain access to the same opportunities and resources available to the wealthy few Also, earnings should be made more equitable by instituting a better minimum wage, reducing earnings inequality and providing more training, education and job opportunities. These policies have the potential to create a more level playing field in the economy where individuals of all income levels have the same chances of success, which will ultimately benefit everyone. How Governments Are Failing to Redress Inequality Governments around the world are failing to implement policies that would promote economic equality and reduce inequality. This is especially tragic, considering working class families are the ones that suffer the most. The way our economy is currently set up, working class individuals lack the opportunity to ever rise up and gain economic security. Those with money, however, can benefit from tax breaks, investment opportunities, and other benefits that are often denied to working-class citizens. This blatant injustice needs to be addressed in order for working-class families to have a chance at achieving a comfortable financial future. This includes inadequate levels of taxation for wealthy individuals, as well as failing to enact taxes on capital gains and other investments. To add to this, inflation plays a vital role in how the economy is rigged in favor of the wealthy. Through inflation, the value of money decreases, making it harder for people to stay afloat and even harder for those with less money to maintain their standard of living. As inflation continues to devalue money, those at the top are able to remain wealthier than those who are not as fortunate. Furthermore, governments often favor large corporations through generous subsidies and tax breaks which further exacerbate the divide between the haves and the have-nots However, recessions are the most apparent example of how the economy is rigged to benefit some and not others. During recessions, large corporations are more likely to receive bailouts while those on the margins of society, who often have no savings or access to credit, face increasing unemployment, poverty and homelessness. Furthermore, governments often favor large corporations through generous subsidies and tax breaks which further exacerbate the divide between the haves and the have-nots. It's clear that our economic system is still broken and needs fundamental reform in order to create a fairer environment where everyone can prosper. Moving Forward: Proposals for Change We need to address underlying issues in the economy such as inequality, corporate monopolies, and the lack of opportunities for those with lower incomes in order to create a fairer working environment for all. The working class are particularly affected by the power imbalances that exist in the economy, where their wages and working conditions can be heavily impacted by large corporations. This is further exacerbated by an unjust taxation system that favor's those in higher socioeconomic positions, creating even more inequality and unfairness. If we aim to create a just economy where all have an equal chance to succeed, we must address these issues head-on. Only then can we create a more equitable system that truly works for everyone. We should focus on creating fair and equitable policies that are beneficial to everyone, regardless of income or background. Unfortunately, the current economic system is often designed to benefit those who already have money and new wealth creation opportunities. This means those with economic privilege and access to new money often continue to be the primary beneficiaries of financial resources, leaving those without money excluded from participating in new economic projects. With new policies and regulations that prioritize economic inclusion and justice, more people can benefit from new money creation opportunities, creating a more equitable economy. We need to invest in education, job training, and other initiatives that help those at risk of being marginalized by the current economic system Additionally, inflation is another factor that works against those with lower incomes. As inflation rises, their money is worth less and less, making it difficult for them to afford even the most basic necessities. To combat this, policy changes need to be made to ensure inflation does not adversely affect those with lower incomes. We also need to invest in education, job training, and other initiatives that help those at risk of being marginalized by the current economic system. Only then can we create a fair and equitable economy that works for everyone. In conclusion, the Cantillon effect is a complicated economic phenomenon that impacts the working class more than any other part of society, and results in a widening gap between the wealthiest and poorest individuals. It's important for us to understand this phenomenon and its implications, so that we can work towards more equitable economic policies in order to create a fairer and more prosperous society for all. Articles sourced for this paper Mainstream economists generally confine the discussion of the Richard Cantillon Effect to redistribution of wealth that occurs with a rise in the quantity of money. The Cantillon effect is the unequal shift in relative prices that results from changes in the money supply, which was first described by the 18th-century economist Richard Cantillon (who inspired political economists such as Adam Smith and David Ricardo). The basic thrust of Richard Cantillons extensive analysis is that changes in money lead to changes in relative prices, which alter productive plans and lead to different fixed investment patterns, so that the new money changes the real economy, with winners and losers. In The Essay, the economist Richard Cantillon describes the economic phenomenon of changes in relative prices across various parts of the economy in response to changes in money supply. The Cantillon effect refers to an unequal distribution of the new money supply throughout the economy, which leads to different rates of growth in different parts of the economy. The basic contours of the Cantillon effect, namely, some individuals having more purchasing power while others having less, are still at work in the same economy, if money creation channels allow them to do so. Cantons best-known idea, the eponymous Cantillon effect, describes the effects of the creation of money on the relative prices and inequality in wealth in society. In comparison, the Cantillon effect, the neglected classic theory on how money allocation affects personal wealth, is among the inequities of our present-day society. The Cantillon effect claims that the first recipients of new supplies of money are given an arbitrage opportunity, the ability to spend the money before prices rise. Changing the supply of money in the economy in order to manipulate relative price levels does not really change anything over the long term. In fact, even price-stabilized economies need injections of money to counteract deflationary effects from economic growth. They are seeing asset prices rise, but prices are still falling across the rest of the economy, because that is happening just seconds after the Federal Reserve is clearly bloating up the money supply. Specific parties get the chance to spend the new paper money on goods and assets that do not have prices reflecting an increased money supply. In the modern economic context, Cantillons theory implies that banks and major institutional investors get access first to new supplies of money, invest them to earn returns, e.g., on stock markets or various risky financial products, and drive up the prices of assets in which they invest. Because the terms inflation and deflation refer to broad, economy-wide changes in prices, the name biflation is a bit misleading, since it does not necessarily refer to any increases or declines in the overall price level, but rather to changes in relative prices caused by changes in the supply of money and credit in various markets. Cantillons own analysis also does not appear to incorporate Austrians own inescapable characteristics of booms and busts associated with the emergence of new money into credit markets; for Cantillon, all new money has a similar redistributive, unequal impact, regardless of whether it is spent in real economies or is introduced into the credit markets, which lowers interest rates. Cited Sources www.investopedia.com 0 www.spencertom.com 1 river.com 2 fee.org 3 mises.org 4 phemex.com 5 www.aier.org 6 www.promarket.org 7 cointelegraph.com 8
OANDA:SPX500USD
by RobinhoodFX
4
6 Reasons why the gold price will drop with interest rate hikes The FOMC announced another 50bps (0.50%) Interest Rate increase to 4.50% which has lead to short term downside for gold as an initial reaction. The question for many remains. Why does gold drop when interest rates rise? There are a number of reasons, but here are the top 5… #1: Investors look elsewhere Higher interest rates can make other investments, such as fixed investment assets and bonds, more attractive to investors. Gold investors will then sell their gold holdings and take advantage of higher interest rate yielding assets. This can lead to investors moving their money out of gold, which can lead to a drop in price. #2: Stronger U.S Dollar A higher U.S dollar can lead to gold being more expensive for investors who use other currencies to buy it. This can lead to a drop in demand for gold, which brings the price lower. #3: Higher borrowing costs When interest rates rise, this increases the costs of borrowing for business and consumers. They now need to pay more to borrow money to fund their operations. This can hamper the economic activity and drop the demand for buying stocks, precious metals and other investments. #4: Higher yields on gold-mining companies bonds Fixed investment gold bonds may seem more attractive than holding and investing in gold itself. This leads to a drop in gold mining stocks which essentially helps with the drop in gold. #5: More supply less demand With the factors I mentioned above, with investors leaving gold this increases the supply of the metal and decreases the demand. This leads to a drop in the gold price. #6: Uncertainty floods the markets When interest rates go up, this leads to uncertainty in financial markets (where gold is no exception). Investors feel the uncertainty and become worried for the economy. This can lead to a decrease in demand for gold and a drop in its price. These are all speculations in theory with why the gold price may drop with an increase in interest rates. We notice that the markets don’t always play according… Since the May 2022 Gold has moved in a sideways consolidation pattern. And this means, we can see the price continue in the range. Until we actually see a break up or down, the analysis in the medium term is sideways. We’ll be watching this carefully. Follow for more trading and fundamentals tips and analyses from the info I've learnt over the last 20 years as a trader. Trade well, live free. Timon MATI Trader Higher interest rates can also lead to higher yields on gold-mining companies' bonds, which can make these bonds more attractive to investors. This can lead to a decrease in demand for gold-mining stocks and a drop in the price of gold. Higher interest rates can also increase the opportunity cost of holding gold, as the metal does not generate any income or interest. This can make investors less likely to hold onto gold as a long-term investment. Gold is often seen as a hedge against inflation, and higher interest rates can signal that the central bank is trying to keep inflation in check. This can reduce the perceived need for gold as a hedge and lead to a drop in its price.
COMEX:GC1!Education
by Timonrosso
1
AW 10YR\INTEREST RATES ANALYSIS - Coiling Up for Higher Rates...In this video I explain my long-term view on 10 Year Bond Yields also known as Interest Rates. If there is one view of mine that has stood the test of time it is my view of this chart. My timing couldn't be better if what I talk about in this video comes to pass. It appears that we have just completed what appears to be the first wave of the upcoming 5-Wave move for Wave E. This pattern has been unfolding since at least 1100AD and it still hasn't completed yet. It provides so many clues as to what is coming in the not-so-distant future. There is no better time to learn how the waves operate in these psychology driven markets. Remember to use Disciplined Money Management Principles to ensure longevity as a trader. If you don't know the long term pattern shouldn't you be doing your research instead of just following the crowd? Just remember: I am not a financial adviser; I suggest using this only as a guide. Always do your own research.
TVC:TNX
by AriasWave
5 Reasons why Interest Rate hikes causes markets to fall - FOMC We had the CPI come our better than expected (7.1%) versus 7.3% expected. This means finally inflation is decelerating at an accelerating rate which is good for the markets. However, today with the FOMC they are expecting a 50 bps hike or 0.5% rise. Just a reminder in simple terms Interest rates is the amount of money (expressed as a %) that a lender charges a borrower for the use of their money. The interest rate is the percentage of the money you borrowed that you have to pay back as a fee. Now there are a few reasons why interest rate hikes can cause global markets to fall including. 1. Better places to invest in Investors take their money out of stocks and financial assets and into banks where the potential return is higher. 2. Strong economy When interest rates rise it tells is the economy is improving and getting stronger. This can lead to higher inflation expectations. 3. Expensive for businesses When interest rates rise, it makes the borrowing more expensive for businesses. This is based on the borrowing of buildings, assets and equipment. They now need to pay a higher rate to finance their debt. 4. Better for bonds and fixed investments Again, investors want a better ROI. They will take money out of the financial markets and more into bonds and other fixed-income investments. 5. Higher US Dollar Higher Interest rates often lead to a stronger dollar. U.S Exports become less competitive which hurts many multi-national companies. and less attractive for U.S stocks. Hope that helps. Save this so you have an idea on how Interest Rates move the markets. Follow for more daily tips. Thanks for the support. Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
The Inflation of the 1980s Tells the Same Story: Pivot=DeclineI have heard both sides: 1) Historically, the Fed pivot will result in a decline in equities because they are pivoting in response to negative economic data which drags on equities, and 2) this time is different, negative economic data is positive for equites because it means inflation is on its way down. When people reference the former, for whatever reason, they don't take a look at the effective Fed Funds Rate in the high inflationary period of the late 1970's and early 80's and compare the Fed's pivot to equities. In the chart shown, you can see that once Volcker, the Chairman of the Fed, finally took a steadfast position against inflation and rose rates violently, inflation began to cool. Both in part of this raise in rates and the public's belief that Volcker had no intention of letting up, ridding the public of inflationary expectations. If you look at the charts, you can see that as inflation rose so did the markets. But as Volcker stamped his foot and pushed rates up, inflation began to cool. USIRRY, the third chart down, shows this. Equities began to decline due to this restrictive economic environment and belief the Volcker would not let up. Notice that, as a result, unemployment (bottom chart) began to rise. This had no positive impact on equities, contrary to what some might think because it would indicate inflation was being taken care of. Instead, the U.S. entered a recession and equities continued to decline. It was only once the Fed stopped lowering rates, unemployment peaked, and inflation neared their target rate did equities bottom. It is not fair to compare equities and pivots to the Great Recession or the .com Bubble, yet even in historical inflationary periods the same story plays out: the markets bottom well after the Fed pivots However, this time could be different in that Powell showed no hesitation in attacking inflation and destroying inflationary expectations. He has taken a direct lesson from history. As a result, unemployment could potentially peak faster than expected, inflation could decrease faster than expected, and equities could bottom faster than expected. I believe today's outcome will be similar to that of the early 80's, but that outcome will happen much, much faster. The markets have not bottomed in my opinion, but I expect them to in mid-late 2023. It's always best to keep equity exposure to avoid missing the bottom. Because you never know . InTheMoney
SP:SPXShort
by InTheMoneyAdam
6
Elliott Wave Review Ahead Of US CPI Data On EUR, NZD and BitcoinWe have a busy week ahead, with plenty of important data for the interest rates policy in US, UK and EU. We have US CPI already tomorrow, which will be interesting data as speculators will put their bets on FOMC decision which is scheduled a day later. From an Elliott wave perspective, I will focus on EURUSD and KIWI which can offer nice buying opportunities on a pullback. I will also look at bitcoin. Trade well, Grega
by ew-forecast
All Eyes On Fed Funds Rate 🏛Hello TradingView Family / Fellow Traders. This is Richard, also known as theSignalyst. I am not a fundamental expert (nor an economist) but I found FEDFUNDS chart really interesting! I never thought that basic technical analysis tools can also be applied to such economic instruments! As per my last analysis (attached on the chart) FEDFUNDS traded higher and broke the red wedge pattern upward. Now we are technically bullish, expecting big impulse movements to push price higher, and small bearish correction movements. We all know that Federal Reserve will most probably increase the interest rates by another 50 basis points (0.5%) next week (on Wednesday) By adding another 0.5% , FEDFUNDS will be approaching a strong resistance zone in blue (4.7% - 5.7%) which might hold the price down for a bearish correction to start and push price lower till the previous high in gray again. It would be interesting to hear your thoughts on this one. Always follow your trading plan regarding entry, risk management, and trade management. Good luck! All Strategies Are Good; If Managed Properly! ~Rich
FRED:FEDFUNDS
by TheSignalyst
18
As we approach the last Fed/ECB meetings of the year.Last week, while the Federal Reserve changed its rhetoric from ‘hiking to fight inflation at all cost’ to ‘slow the pace of rate hike’, seismic waves rolled over the markets. As we approach the last central bank meetings of the year, the ECB meets on (15th Dec), Fed on the (14th Dec). A temperature check on the expected path of rates for the 2 major central banks would give us a good sense to position ourselves. The Fed After Fed Chair Jerome Powell’s speech last Wednesday at the Brookings Institution in Washington, one line in particular (“The time for moderating the pace of rate increases may come as soon as the December meeting.”) shifted the market’s perspective. With the USD weakening further and terminal rates repricing slower and lower than expected, markets seem to have priced in a 50-basis point hike by the Fed in its December meeting. A slowdown from the back-to-back 75 basis point hikes we have come accustomed to. As noted in the chart above the EURUSD pair has generally moved alongside the dollar direction, should the dollar continue its tumble downwards, the EURUSD is likely to trade higher. The ECB After raising rates by 75 basis points in the last meeting to 1.5%, the ECB still faces mounting inflation. Market expectations still swing between a 50 to 75 bps hike for the upcoming ECB meeting as the Eurozone still struggles with high inflation. The ECB may also have more headroom to maneuver as current rates remain below the expected terminal rate and the 200 basis points hike still pales in comparison to the Fed’s 375 basis points move. However, we do have to caveat that intricacies matter here, for example, the inflationary effects in the US are largely driven by the demand side, while in the Eurozone are driven by supply-side effects. Regardless, the next few days will remain key for any policymaker comments to guide the markets as the meeting date nears. Policy timing and direction uncertainty put the EURUSD pair on our watchlist. The last time the 2 central banking policy timelines diverged, we called it out on one of our previous ideas. You can check out here . Additionally, we spot an ascending triangle pattern on the chart which generally signifies a bullish continuation. With the previous ascending triangle breaking out in a textbook manner, we will watch if the current setup trades the same. Prices have also broken a previous support-turn-resistance level, which could prove as further conviction of the upward move. With a clear technical setup and the potential for the ECB to surprise hikes to the upside, we lean bullish on the EURUSD pair. We set our stop at the 1.0440 level, and take profit level at 1.0900, with each 0.00005 increment per EUR in the EURUSD futures contract equal to 6.25$. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Sources: www.cmegroup.com www.ecb.europa.eu www.federalreserve.gov
CME:6EZ2022Long
by inspirante
9
Exciting Times for $ Denominated Pairs!In this video we look into DXY structure and how this is so exciting for a few USD pairs. Generally across the board on the HTF we are seeing lots of corrective patterns completing their moves. These are nearly always followed by large impulsive movements in the market which are fantastic to capitalise on. USDJPY and GBPUSD see some clear impulsive phases beginning and we forecast how those entries may present themselves. Whilst we have to remain impartial, the Macro perspective on the $ looks like we could see some weakness and the £ seems like we could see some strength. This look particularly good for GBPUSD. If the markets are pricing the future rate hikes in this coming week then we could see some big movements. If not, we might be looking at some corrective behaviour until 14th December. This will be a very interesting week, for sure. Please comment below and engage with the post - would love to hear your thoughts.
by jakecarling41
GOLD SHORT TO 1687 (MID TERM VIEW)💥:Even though we are bullish on Gold long term, I still believe there's a chance that we could be entering a Wave 2 correction, which could lead into 2023🤔 If you look at the chart, you'll see market has or is just about to finish its 5 wave impulse move, which would mark the completion of Wave 1. This should technically be followed by Wave 2 correction, which should cross back below 'Wave IV' in order to count as a healthy retracement. This gives us the chance to target 1690-1670. This leading into 2023 means Gold will have the chance to grab downside liquidity which is required, before shooting up towards new ATH's. Not just that, a possible hedge position from the 1700 level also allows us to sell towards 1570, if Gold was to break below 1660. 🔴This analysis is only valid following a break below 1758. If confirmations not met, just let Gold carry on soaring🔴
SAXO:XAUUSDShort
by BA_Investments
Q. How do you work out CFD Interest Swaps with an example?Q. How do you work out CFD Interest Swaps with an example? Answer: CFDs is an instrument where you pay a small amount of money to be exposed to the full value of the share. With CFDs, there are daily charges when you buy and daily income interest that you receive when you sell (go short). The charge is known as a ‘daily swap’ or ‘daily interest charge’. You can ask your broker what the annual interest swap rate is or you’ll most likely be able to find it on your platform… With my broker for example, the long swap (for when you buy) is -9.47% per year. And the short swap (for when you sell) is 2.71%. With your Shoprite trade, because you’re buying CFDs (which is a geared instrument), you’re essentially borrowing the money from the bank. This means, you have to pay interest on the borrowed funds (in order to be exposed to the full value). Those are the ‘swaps’ we’re talking about. Let’s say the Shoprite share is trading at R223.19 and the margin (initial deposit) to buy 1 CFD is 9.7% (R21.70). This means, when you buy 1 CFD for R21.70, you’ll be exposed to the full R223.19 worth of the share. If you buy 100 CFDs and pay R2,170 (100 CFDs X R21.70) you’ll be exposed to the full R22,319 worth of shares (100 shares X 223.19). And if you sold the 100 CFDs at R236.00, you would have been exposed to R23,600. On that R22,319 exposure, you’ll pay 9.47% (R2,113.60) interest (swap) per year. But luckily as traders, you don’t need to worry about paying the full amount, as we like to hold only for a short period of time. This means, each day you hold the CFD with exposure of R22,319 – you’ll only pay R5.49. (Exposure of your trade X 9.47%) ÷ 365 days. If the exposure never changed and you held onto your trade at the same share price you would pay R54.90 (after 10 days). However, we know that share prices move up and down each day. The higher the market goes up, the higher your exposure where you’ll pay slightly more. If the market price drops, you will pay slightly less. However, as traders we don’t tend to hold for more than a couple of days or weeks to curb the daily interest charges. If you have any other questions please ask in the comments :) Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
DXY Bias Week Nov. 27- Dec 2BIAS-SHORT until next level 105.40-105.00 then monitoring that area for PA. NOTES- Currently fundamentals is against the dollar due to fed meetings on looking to slow down interest rates in the near future. Our next interest hike is on December 14. Will the feds keep up the 0.75% basis hike or will it be 0.50% this time around ? If the feds slow down interest hikes and our last final interest hike for Dec 2022 is lower than the previous hikes, we can expect the dollar will fall. Im expecting them to keep the 0.75% in December ending the year off with the dollar pushing back up to around 110.00- 112.00
TVC:DXY
by thefxgirl