By any measure, the unemployment rate is on the rise. But exactly how bad is the problem and what are the implications for the broader economy? To put things in perspective, we need to consider how the unemployment rate is calculated, who is considered employed and who isn’t. Many claim the official rate is flawed and presents an optimistic picture that doesn’t truly reflect reality. Other quoted statistics measuring job loss can be deceptive if selective time periods are used. In our latest infographic we have taken a broad view of the American workforce over the last five years showing the various employment conditions and how each is categorized.

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<a href="http://www.mint.com/blog/wp-content/uploads/2010/03/MNT-EMPLOYMENT-PERSPECTIVE-R6.png"><img src="http://www.mint.com/blog/wp-content/uploads/2010/03/MNT-EMPLOYMENT-PERSPECTIVE-R6.png" alt="MNT-EMPLOYMENT-PERSPECTIVE-R6" title="MNT-EMPLOYMENT-PERSPECTIVE-R6" width="900" height="1597" class="alignnone size-full wp-image-9112" /></a><br /><a href="http://www.mint.com/">Budget Planner</a> – Mint.com

Photo: Matt Biddulph

Planning a trip abroad? Have a great time, and don’t worry about traveler’s checks: wherever you’re going, no matter how piña colada and palm-frond-oriented, they probably have a full array of ATMs and credit card terminals to keep you happy.

But be forewarned: pickpockets have their eye on your wallet. Their names are Visa, Mastercard, Citibank, and a host of other light-fingered financial professionals.

These guys have a few strategies for draining your cash. You can’t avoid all of them, but you can do a lot better than the naive traveler. And, to be fair to the companies I just referred to as pickpockets, modern exchange services do make travel a lot easier, and it doesn’t seem unreasonable to pay a few bucks for that. It’s like air travel: you rarely get to fly free, but only a sucker pays full price.

Here are the fees you’re likely to come across when spending abroad with a credit card, debit card, or ATM withdrawals:

• ATM out-of-network fees. This flat fee (typically $5) is charged by your bank for using a foreign ATM. Generally, big banks charge it; community banks, credit unions, and online banks don’t.
• Bank ATM fees. This is the fee charged by the bank that owns the ATM you’re using. You’re more likely to come across this in some countries than others. (And if you’re visiting the US from abroad, I would like to personally apologize, because the US is the worst offender here.) Some banks–particularly online banks–automatically reimburse you for this type of fee. Ally Bank, for example, reimburses all ATM fees.
• Foreign exchange fees. Visa and Mastercard charge you a percentage fee on all foreign transactions, and banks typically tack on a percent or two on top of that. The fee (up to 3% total) usually applies to credit, debit, and ATM transactions. This can add up fast. Capital One credit cards waive this fee entirely. (So does Discover, but who takes Discover?) If you travel a lot, carry a Capital One card–if you can qualify, that is; they’re sticklers for a high FICO score. For a trip to Japan next month, however, I’m not going to bother applying for a new card; I’m using my credit-union-issued card, which charges a flat 1%. I can live with that.
• Cash advance fees. If you use your credit card to withdraw cash at an ATM, you will pay and pay. Unless it’s an honest-to-God emergency, don’t do this.
• Exchange rates. This is the sneakiest of all, because it’s hidden. When using a credit or debit card, you generally receive a fair exchange rate, a wholesale rate comparable to what’s published in the Wall Street Journal or the Universal Currency Converter. (If you get a rate that differs significantly from this, call your bank and complain.) At an airport currency counter, you’ll get an unfavorable rate. Worst of all is exchanging cash at a store. And if a merchant offers to ring up your credit card transaction in US dollars to avoid the foreign exchange fee, decline unless you can check the exchange rate on the spot.

Your bank’s web site is unlikely to be forthcoming on what they’re going to charge you when you travel. Call the bank and walk through two specific scenarios with them: what will you charge me, in total, when I use my card at an ATM in Barbados (or wherever you’re planning to drink your piña coladas)? What about when I use it as a credit or debit card?

Furthermore, it pays to do this before you book your trip. Banks have been known to charge the 3% exchange fee for, say, booking a flight on an international airline, even when the trip is booked in dollars.

Before you go

If you’re traveling to a place you’ve never been before, it pays to find out what the payment landscape looks like. Is plastic widely accepted? Are ATMs ubiquitous? Will they accept your card?

A little Googling here goes a long way. People who travel love to talk about the gritty details. (TripAdvisor is a particularly good resource.) A search for “Japan ATM cards” informed me that Japan is relatively cash-oriented compared to the US, and that my Mastercard-logo card won’t work in most Japanese ATMs, but it will work in ATMs at the post office. There’s a post office near my hotel, so I expect this won’t be a problem. Just in case, though, I’m bringing some Japanese cash with me.

I have an account with Chase, and my neighborhood branch was happy to order me up some yen. It took one business day to fulfill my order. This being the future, I was able to pull up the Currency app (free) on my iPhone to make sure I was getting a fair rate.

Unsurprisingly, I wasn’t: Chase charged me a larcenous 5 percent surcharge over the nominal exchange rate. Which illustrates an important point: don’t waste too much time figuring out how to save a few bucks on your first couple hundred dollars of foreign money. (That’s what I’m telling myself, at least.)

Should you bother to get foreign cash before you go? Probably not. It depends to what extent you’re heading into the unknown. This is my first trip to Japan and I will have a six-year-old in tow, so I decided to grease the wheels as much as possible. I expect to learn upon arrival that it would have been easier and cheaper to hit an ATM at the airport, but I’m just as happy not to have to figure out how to use a Japanese ATM (or whether my card will even work in this particular one) first thing after a ten-hour flight with a sleepy child clinging to my leg.

Finally, for any credit or debit card you’re planning to take on your trip, flip the card over and call the 800 number. Tell them where you’re going and when. But be prepared to have your card declined sometimes anyway: bring multiple cards, and keep a cash stash. The last thing you want is to have to explain why you can’t pay for that piña colada you just finished.

(futureatlas.com)

Mobile banking has been a blessing to anyone who values quick, painless money management. Here in the United States, the ability to check account balances and transfer money via mobile phone has reduced the need to bank at physical branches (never a fun task), or even sit in front of a computer. However, in emerging economies, mobile banking means something far more profound. While mobile banking is chiefly a matter of convenience in the developed world, for emerging economies it is increasingly the difference between banking or not banking at all. In our previous article on the future of mobile finance, Mint discovered that 36% of the people in India, for instance, “…earn less than Rs 5,000 a month [and] own a mobile phone, but do not have a bank account.”

Similar situations are found in other developing markets. TMCNet predicted in November 2008 that “…will grow at nearly 7 percent annually through 2013 and will exceed $200 billion by that time” and furthermore that “…the growth will be driven by emerging markets in nations such as Brazil, Russia, India and China, and on the continent of Africa.” Indeed, TMCNet continues, “…collectively, emerging markets will compose about 60 percent of the market share in 2013.” Gavin Krugel, director of mobile banking strategy at the GSM Association, goes a step further, claiming that, “…one billion consumers in the world have a mobile phone but no access to a bank account.” What is lacking in these countries are not mobile phones, but – until recently – mobile banking technology tailored to their unique needs and circumstances. Luckily, the mobile banking scene in developing markets is rapidly beginning to take shape.

Today, we’ll take a closer look at what mobile banking (in its advancing state) means for the developed world, both in the short term and down the road.

Helping The Poor

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One promising aspects of mobile banking is its potential to help the poor in developing nations. As noted earlier, the impoverished state of many of these nations is such that the average citizen has little or no access to real banking services. India, with its 36% of citizens earning less than Rs 5,000 a month and lacking a bank account, offers one example, but it is hardly the only example. GlobalEnvision.com cites The Consultative Group to Assist the Poor, which estimates that, “…80 percent of people in least developed countries are unbanked.” The Jakarta Globe makes mention of people in, “…rural and remote areas” of Afghanistan, Asia and Africa who can now “…get paid, send remittances or settle their bills” using mobile banking technology.

Thanks to such services, it has never been easier for citizens of an impoverished nation to receive money from friends or relatives in developed countries (which are often frequent transactions among these parties.) Even bill paying has long been cumbersome chore in many emerging markets. While those in the U.S. can pay with one click of a mouse (or even one tap on an iPhone screen), the Jakarta Globe reports a far more involved process in parts of Africa, where Fundamo regional executive Reg Stewart says, “…it takes one day to pay one bill” because Africans must, “…physically go to the bank, then you must queue, a long queue.”

Similar stories abound in just about every emerging market one can name. Simple money management tasks that are routinely taken for granted in the developed world often require painstaking effort elsewhere. Needless to say, such burdens make it difficult for the poor to participate in the economy or improve their own prospects in any meaningful way. Mobile banking technology has the potential to be trans-formative in this regard by expanding the sphere of opportunity of anyone who uses it.

Stronger Economic Growth

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The spread of mobile banking in developing countries has the potential to be the proverbial rising tide that lifts all boats. GlobalEnvision goes on to quote Jeremy Leach of FinMark Trust, who claims, “…what we’re finding from the evidence from economists is that actually greater access to financial services improves economic growth.” Nor is it at all difficult to understand why this would be so. It only stands to reason that when thousands (indeed, sometimes millions) of a nation’s citizens can only participate in the economy with physical currency, it will be difficult for the broader economy of that nation to grow with any regularity. In fact, this is a central focus of Hernando de Soto’s eye-opening book The Mystery of Capital.

The main reason, “…why capitalism triumphs in the west and fails everywhere else”, according to de Soto, is not corruption, insufficient compassion from developed countries or lack of entrepreneurship in developing ones. Far from it, as de Soto observes “…the inhabitants of these countries possess talent, enthusiasm and an astonishing ability to wring a profit out of practically nothing.” Astonishingly, de Soto states, “…if the U.S. hiked its foreign aid budget to the level recommended by the U.N. – 0.7% of national income – it would take more than 150 years to transfer to the world’s poor resources equal to those they already possess.” Rather, the missing link in many developing lands is a clearly defined property rights system and financial infrastructure. Lacking such a system, individuals cannot easily get loans by pledging their homes as collateral, for instance (since their ownership and creditworthiness are not officially recorded.) They are therefore left to rely on less advantageous sources of borrowing or, more often, simply not borrowing at all.

While mobile banking alone cannot create the, “…formal, unified property system” de Soto argues is essential to lasting prosperity, it is a bold step in the right direction. As ForeignPolicy.com explains, “…now, anyone with access to a cell phone has a place to keep his or her savings without needing a traditional bank account.” If a nation’s citizens can receive payments from remote senders, take out loans, and build a credit history using little more than the mobile phones they already have, there will be far less standing in the way of their playing larger economic roles.

Reduced Corruption

(futureatlas.com)

While corruption is not the sole cause of poverty in emerging markets, it is undoubtedly a large one. Interestingly, however, mobile banking has already displayed its potential to reduce corruption in the nations that adopt its use. The Jakarta Globe relayed a hopeful anecdote from Afghanistan, whose national police are paying its officers using services from Roshan as part of a test to limit corruption. It works as follows. Every month, Jakarta Globe reports, “…officers receive a text message in the language they prefer informing them that they have received their salaries.” Because, “…a lot of them are illiterate and cannot read”, voice mail alerts are also dispensed containing the same information. Once a text or voice confirmation has been received, officers are then able to collect their pay from an authorized Roshan agent. But the benefit is not simply, as Jakarta Globe says, “…that police officers don’t have to carry cash anymore” and can now “…send their money home, buy items, and take hwatever cash they want from an agent, or to store for the future.”

What the Roshan system has done is help ensure that officers who were being scammed out of their full salary get all the money they were promised. According to Zahir Jhoja (Roshan’s head of mobile commerce), corruption in officer pay was substantial and widespread, with many officers reporting being “…very surprised that they earn so much money.” Prior to Roshan, when payments were made in cash and nothing was documented, the very same officers, “…were receiving 25 to 30 percent less” every week, according to Jhoja.

The implications are clear. Much of the corruption in the developing world persists because of manual payment processes run by corrupt people. Such a system opens the door to bribery and all manner of dishonesty and fraud. Automated mobile systems like Roshan’s, however, offer streamlining that makes it more difficult for unscrupulous individuals to game the system.

Recap

To recap, we have learned that mobile banking has much to offer the world’s emerging markets. Chiefly, the ability to tie a bank account, investment portfolio or credit report to a mobile phone empowers poor people (many of whom have never participated in a formal banking system.) Consequently, these people are better positioned than ever before to increase their standards of living via easier access to debt financing and other financial services. Finally, mobile banking is displaying the early potential to discourage certain types of corruption that are rampant in developing nations. All told, there is much to look forward to with respect to mobile banking technology in the world’s emerging markets.

Photo: dizznbonn

“There’s one for you, nineteen for me,” wrote George Harrison of The Beatles. He was talking about the taxman.

If you’re a single person with no dependents, you might feel the same way come April 15, 2010. Because single people with no dependents don’t get to take advantage of some of the richest deductions and credits that help lower your overall tax bill.

Unless you work for yourself, most of the taxes you pay to the federal government come right out of your paycheck. Some people think the IRS does them a favor when the government sends that big tax refund check every year. What they don’t realize is that a refund is just another way of the government telling you they collected too much. That’s like going to the grocery store and giving the checkout guy a $20 bill for $10 worth of stuff and having him tell you he’ll send you the change next year.

Whether you get a refund or end up owing in April is irrelevant. Go back to last year’s 1040 and get a good look at what you ended up paying to the government. And follow the steps below to try to take a smarter approach in your dealings with Uncle Sam.

Sign up for a Flexible Spending Account at work

If you work for a company that offers a Flexible Spending Account (FSA) you should sign up for it. An FSA allows you to set aside a portion of your income tax-free to pay for qualified medical expenses such as deductibles, co-payments and coinsurance for your health plan. It also includes medical expenses not covered by the health plan, such as dental and vision expenses and over-the-counter drugs and medical supplies like contact lens solution. So how much can you save? Check out the calculator at the Federal Flexible Spending Account Website. It will give you a good idea as to how much money in tax savings an FSA will put in your wallet.

Resume your retirement plan contributions

2008 was a nightmare for the stock market. How bad? If you lost 30% of your 401(k) then you did better than a lot of people.

So many people scrapped their retirement savings like that old used car they kept pumping money into. If you did, that’s a shame. 2009 gave us some big gains in the market and if you bought in during the lows of 2008, you made a pretty nice return through the end of this year. You might not be back to even yet, but this isn’t money you’re going to spend in the next five years. For most of us, this is money we’re going to spend decades from now. And a diversified portfolio of stock and bond funds still gives us the best chance for the kind of growth we need to outpace the rising cost of goods.

Those short-term losses also don’t look so bad in light of the fact that a good bit of that money would have gone to the IRS anyway. (When you put it that way, it almost makes you feel good.) If you have a 401(k) at work, your contributions come out of your gross pay. So it ultimately lowers your income for federal tax purposes. It’s the easiest, smartest way to lower your tax bill.

If you don’t have a 401(k) at work, look into a traditional IRA. If you qualify, contributions are tax deductible

Consider buying a home

In case you haven’t noticed, the federal government still wants you to own a house. Here are a few of the incentives they’re offering:

* Generally, the interest you pay on your mortgage is tax deductible.
* The local real estate taxes you pay are tax deductible.
* They’ve extended the $8,000 first-time home buyers tax credit until April 1, 2010. And they’re giving a $6,500 tax credit to current owners if they buy a new home by April 1, 2010.

Now don’t go out and buy a home just to lower your taxes. But if you have some money saved for a down payment, you’re tired of renting and you’re getting killed in taxes, then buying makes sense.

It’s also a good buyer’s market. Don’t get spooked by the nightmare foreclosure stories over the past few years. Remember, the vast majority of people in our country continue to pay their mortgages on time. (And most of the ones who didn’t were in Florida, California, Nevada, and Arizona.) A good home in a good neighborhood will hold its value.

Take a second look at the home office deduction

It used to be a little-used deduction that was designed for self-employed people. In the past, many people were reluctant to take it as it was often viewed as a “red flag” for an audit.

But new technologies mean more and more people are working from home. So even if you work for a big company and your primary office is in your home, then you could be eligible for this deduction. And changes to the rules in recent years mean it isn’t looked on as the audit trigger it used to be.

You’re eligible for the deduction whether you are an owner or a renter. But keep in mind, you can’t just set up a computer in a corner of your bedroom and call it your office. There’s got to be a space in your home that is exclusively and regularly used for your office. (Hint: If there’s a pool table in the room it probably won’t qualify. Unless you’re a billiard ball wholesaler.)

Consider a Roth IRA conversion

This is the one tip that will actually increase your tax bill in 2011 (and possibly 2012), with the goal of decreasing the taxes you pay years down the road.

Let’s say you have money sitting in a traditional IRA. (Maybe it was a previous employer’s 401(k) that you rolled over.) If you convert that IRA to a Roth IRA, you will have to pay income taxes on the amount that you convert. But all earnings you receive on that money will be tax-free when you take it out (so long as it’s a “qualified” withdrawal, which generally means you’re over 59 1/2.)

And the restrictions on making such a conversion ease up in 2010. Currently, if you make $100,000 per year or more then you are ineligible for an IRA conversion, but that rule is being suspended in 2010. If you make a conversion in 2010, you will be able to pay half of the tax you owe in 2011 and the other half in 2012.

It’s not necessarily right for everyone. But if you think you may end up with a lot of money in retirement that hasn’t been taxed yet (like your 401(k) or traditional IRA money), wouldn’t it be nice to have cash that you’ll be able to take out income-tax-free?

2010 Tax Planning Guide Provided by AskMen.

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These days, it’s not about who has the flashier designer clothes or the faster car – it’s about who has the higher credit score! That’s because the better your score, the better position you’re in to manage your financial future.

Why? Believe it or not, have a strong credit score is one of best ways to save money, says financial lifestyle expert Denise Winston, founder of Money Start Here, which produces financial seminars and DVDs. “Your credit score can determine if you get your dream job, your auto insurance rates, the cost of future loans, if a landlord will rent you an apartment, and much more,” she says.

In order to become a “first class” credit user, start by adopting the strategies of these top-tier score holders.

Credit is No Laughing Matter: Jim Dailakis
Credit Score: 760

New York City-based actor/comedian Jim Dailakis may be a clown on stage, but when it comes to his financial status, he’s straight as an arrow. The Australian-born performer owns two homes and pays his bills on time without fail.

His strategy: “I see when the due date is and then put it on my electronic calendar on my computer,” Dailakis explains. Then, he says, he makes sure he has enough to pay the total amount, to the penny, every time.

Why you should try it: “It’s very liberating not to feel the ‘wolf’ pounding at my door,” says Dailakis. “I’ve definitely acquired financial discipline.”

Lesson learned: Keeping up with your credit can be a challenge, says credit consultant Wayne Sanford of YourCreditSpecialist.com. He suggests setting up an online auto-pay. “This way, you can have the amount you need transfer directly to your creditor and not pay any extra fees.”

Extra Credit: Anna del C. Dye
Credit Score: 804

Anna del C. Dye, a new-fantasy author from Salt Lake City, UT, is proud of her long-lasting marriage as well as her financial acumen over the years.

Her strategy: “When my husband got a raise 10 years ago, we opted to add it to the principal in our mortgage rather than our monthly expenses,” says Dye. “We lived on the same income as before and paid our house faster.”

Why you should try it: “Our house is ours and so is everything in it,” says Dye. “Now we can eat out more often, help others, go to the movies more often, and travel around the world. We get to play and have fun when we are still young.”

Lesson learned: “Our culture’s lenient attitude toward debt is harmful,” says Peter Dunn, personal finance expert and author of 60 Days to Change. “If you want great credit, you must develop an urgency to become debt-free.”

Divorced from Bad Credit: Tammie Aaron-Barrada
Credit Score: 789

Tammie Aaron-Barrada’s first husband essentially ruined her credit just by having his name on her cards, and running her into debt. After they broke it off, she was left to claim bankruptcy. The entrepreneur and inventor from Ruffs Dale, PA, has since made rebuilding her credit top priority.

Her strategy: Aaron-Barrada had to made wise decisions to reestablish her credit standing. She took out 90-day same-as-credit accounts to buy new furniture that she could afford, as well as made sure she put utilities in her name and paid those bills on time.

Why you should try it: Aaron-Barrada says having great credit gives her peace of mind, should an emergency ever arise. Building back up to a high credit limit means she won’t be left high and dry ever again, and has a better credit score to show for it.

Lesson learned: “When you make someone a joint-account holder or you co-sign a loan, you become fully responsible,” warns Denise Winston. She recommends checking your potential spouse’s credit report and finding out if he or she owes back taxes.

“Your credit score has the potential to determine the quality of your life,” says Winston. “It can potentially cost you thousands, if not hundreds of thousands, of dollars over your lifetime.”

Are You a Credit Score Wannabe is provided by Experian.com

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Once destined for stagnation and communistic despair, China has produced truly breathtaking economic growth over the last several decades. Indeed, it is difficult to exaggerate just how much – and how quickly – the Chinese economy has grown. At a time when most major economies are struggling to catch their breath amidst a recession, Bloomberg warned on January 11, 2010 that China risked “overheating” with forecasted 2010 growth rates as high as 16%. Many eyes widened when China embarked on a massive stimulus spending spree (4 trillion yuan, according to BBC) to offset slumping imports, but in December of 2009, Bloomberg says that, “…China’s exports grew 17.7 percent from a year earlier.” However, the story of China’s ascension as an economic powerhouse began long before the current financial crisis, or even the decade of the 2000’s. In his book Applied Economics, Thomas Sowell writes that, “…as of 1991, India and China had very similar output per capita.” Nevertheless, just a decade later, “…China’s output per capita was double that of India’s.”

Nor did China merely grow relative to its neighboring nations, as China now boasts the second highest GDP in the world (as measured by purchasing power.) The primary driving force behind this historic explosion of economic growth, Sowell observes, was a radical shift in economic policy – specifically, “…a process of moving away from a government-run economy to more of a market economy.” Time Magazine concurs that China, “…only started growing when the overbearing government got out of the way and allowed private enterprise, both Chinese and foreign, to thrive.” The lifting of government restrictions on international trade and foreign investment have transformed the Chinese economy to a degree representing a night and day difference between today and just twenty years ago. Today, China is the world’s second largest economy – a meteoric rise for a country whose population of 1.3 billion was not long ago doomed to starvation.

In continuation of our series on growing economies, we’ll break down China’s economic landscape – the opportunities, government incentives to producers, fast-growing industries, and what the future holds.

The Opportunities

Much of China’s economic expansion has been the result of inexpensive exports, which are happily consumed by the rest of the world. And a significant portion of this activity has involved trade with the United States. USAChina.org displays a table showing that US imports of Chinese goods has risen every year during the last decade – beginning at $81.8 billion in 1999 and ending at $337.8 billion in 2009. While Chinese imports of US goods have also risen year to year during the same time, the increase is far less pronounced: $13.1 billion in 1999 versus $71.5 billion in 2008. Staggering as Chinese exports to the US are in isolation, the US is hardly the only source of demand for Chinese goods. Exports to the entire world rose from $194.9 billion in 1999 to over $1.4 trillion by 2008. USAChina.org also broke down the goods most frequently exported by China in 2008 – to the entire world – as follows:

1. Electrical machinery & equipment ($342 billion)
2. Power generation equipment ($268.6 billion)
3. Apparel ($113 billion)
4. Iron & Steel ($101.8 billion)

(myuibe)

Such numbers indicate opportunities in each of these industries, which benefit from tremendous and growing demand from the rest of the world – especially the United States. Various investors also spot growth opportunities on the Chinese stock markets. Foremost among these is Warren Buffet, who Motley Fool quoted in 2008 as saying:

“The 19th century belonged to England, the 20th century belonged to the U.S., and the 21st century belongs to China. Invest accordingly.”

As far back as 2006, AIGA.com remarked on the branding opportunities available in China now that the government there has become more permissive of foreign investment. Citing a massive influx of foreign activity after China joined the World Trade Organization in 2001, AIGA comments on a report by Bernstein Investment Research & Management stating, “…China will produce world-class brands and they will challenge incumbents in China, and around the world.” Bernstein also discussed a broader “…impetus to position Western brands within China itself.” Sure enough, American and European franchises have found that their products and services, “…are especially appealing to younger Chinese”, while, “…older Chinese consumers are fiercely patriotic, and want to buy native brands.”

Another growth area appears to be precious metals, which NuwireInvestor.com claims are needed to support China’s continued growth. For instance, China, “…has been by far the largest importer of platinum and palladium over the past 12 months”, as of October 2009. ChinaMining.org likewise quoted Christopher Parker of Brook Hunt as saying, “…like it or not, China has truly become the most major force in the world of zinc.”

The Incentives to Producers

The greatest incentives to Chinese producers (domestic and foreign) have been the general trend of government easing up on various trade and investment restrictions, which limited that country’s growth for many years. Back in 2006, IncentiveMag.com dubbed that year, “…the year of the carrot” because of the various incentives that were made available for doing business domestically. While China was once seen, “…first as a source of cheap labor”, foreign businesses see China, “…increasingly now as a viable market in its own right.” Although China once consisted, “…merely of big multinationals and cheap outsourcing”, smaller US companies, for instance, “…have begun to set up shop” because of reduced complexity, bureaucracy and startup costs.

(cogdogblog)

Various industries have been targeted specifically with unique incentives of their own. The auto industry is a recent example. In December 2009, the Wall Street Journal reported that that Chinese government would be, “…extending a purchase tax cut on smaller passenger vehicles”, as well as, “…expanding subsidies for alternative fuel vehicles, purchases in rural areas and for consumers trading in older cars.” On top of that, the government, “…halved the sales tax on vehicles with 1.6 liter engines or less” to 5% – a move that the Journal suspects helped put the Chinese auto market, “…on track to surpass the US” in 2009 in terms of higher auto sales volume. ChinaInvestor.com reported in October 2009 that China had launched a portfolio of incentives aimed at increasing solar energy production. Specifically, the Chinese government is offering to, “…subsidize the costs of installing solar energy systems on buildings.”Another proposal calls for the government to offer “…up to 20 RMB ($2.93) per watt for solar-panel installations that are 50-kilowatt or larger”, which could pay for, “…50%-60% of a system’s installation cost.” Still another program (called “the Golden Sun”) involves the government paying half the cost of building, “…grid-connected solar projects, and up to 70% for off-grid projects in remote areas.”

More broadly, Chinese companies benefit from paying a flat corporate tax rate of just 15%. By comparison, the U.S. assesses corporate income taxes of anywhere from 15%-35% on C Corporations, depending on the income earned.

The Future

In addition to its frenetically paced growth, China’s economic fundamentals appear strong. The 2009 Legatum Prosperity Index states that, “…unemployment in China is at 4%, and this, coupled with a relatively low inflation rate of only 5%, inspires reasonable confidence in the economy.” Also, despite China’s rapid and continuing growth, the country’s domestic savings rate is the, “…third highest globally”, at 53% of GDP. Additionally, China has produced double-digit GDP growth in each of the past ten years. China ended 2009 on a high note, with the UK’s Times Online noting that the country’s GDP rose, “…by 10.7 per cent in the fourth quarter compared with the final three months of 2008.” While the Times cautioned that China is still burdened by its growing population, it appears as though world markets are rapidly absorbing Chinese labor for increasingly productive and profitable uses. In a similar vein, BusinessWeek stated on January 22, 2010 that retail sales rose over 16% last year (after adjusting for consumer price changes) – the largest such rise since 1986 – which prompted BusinessWeek to conclude ,”…the world may again this year count on China as the biggest engine of growth.”

Photo: Mykl Roventine

The expression “as good as gold” suggests that gold is something of a sure thing when it comes to investments. But, while gold and other commodities remain a solid investment choice, when it comes to investing there’s no such thing as a sure thing. The trick to investing in gold is knowing the difference between gold and other asset classes; stocks, bonds, real-estate, even cold hard cash.

Putting a Value on Gold

Let’s start with its value or, as with so many things, its perceived value. Valuing gold is a tricky thing. Without earnings or cash flow (which is the most commonly used metric in valuing a company and its stock) it can be tough to identify the appropriate valuation of gold. How many dollars should an ounce of gold be worth? The spot price is simply dependent on the market forces of buyers and sellers; therefore, for the price to increase, you need more buyers than sellers. So rather than speculating, consider the following approach.

Gold as Insurance

Don’t trade gold. Moving in and out of a gold position, like many do with stocks is not a smart strategy. Gold, historically, is very volatile and has erratic movements in its spot price. Attempting to guess short-term price movements is near impossible.

The right way to view gold is as insurance. The beautiful thing about gold is that it is very tough to manipulate its price, especially over time. Stocks, bonds, and even currencies can be manipulated by political powers through monetary policy and government action. Gold will keep its value through a wide range of economic scenarios which is one reason it is so appealing during an economic downturn such as the one we are currently suffering through. As such, it can be held in order to insure against risks to your other assets. So, what are the risks?

The number one risk that you should be prepared for is the loss of purchasing power of your currency. Typically this happens whenever the government attempts to manipulate the economy in some way. The latest attempt to “fix” the struggling economy has only delayed the inevitable by increasing the national debt. The influx of cash from the economic stimulus package needs to be paid for somehow. And the usual result of this kind of spending spree is a debasement of the currency and/or inflation. When inflation occurs, your dollars are worth less. Put in layman’s terms, it is akin to attempting to dig yourself out of a hole. More debt creation will not result in getting us out of debt. So how can you protect yourself against this risk? You need insurance.

Now, just like you should not put all your eggs in one basket for a specific stock, you should not be betting the farm on an increase in the price of gold either. Liquidating all of your assets and buying gold would be a little extreme. Instead, insure your assets and your purchasing power by allocating a percentage of your assets in precious metals such as gold. Most experts recommend allocating somewhere in the range of 10%-30% of your assets. If you’re new to the gold game, start with 10%.

How to Buy and Own Gold

Ain’t nothing like the real thing baby. Part of your gold allocation should be in real, physical gold that is in your possession. You can purchase gold coins or bullion from precious metal dealers. Obviously, you will need to give good thought to where and how you will store your gold and protect it from theft or loss. Sorry, Fort Knox is not an option.

You can also consider buying ETFs that attempt to track the spot price of gold. You can purchase these ETFs (such as GLD) like any other stock through your brokerage account.

Lastly, you can consider creating an account with a company like GoldMoney. GoldMoney allows you to deposit cash and keep your account balance in gold. When you wish to withdrawal your funds, you will then transfer your money back into cash based on the spot price of gold at that time.

If you’re concerned that the price of gold has already risen considerably over the previous years (which it has), consider dollar cost averaging into the appropriate size position that you wish to hold. Buy a fixed number of gold coins each month or every couple months. This will help prevent buying all of your gold at one time which might be at a relatively high price.

Speculating on the price of gold can be as risky as any other form of investment. Instead, use it as a hedge against inflation and a way to gain additional diversification. But don’t take my word for it. As with any investment be sure to do your own research.

For more of Kevin’s writing, visit personal finance blog 20smoney.com.

Got credit card debt? If so, good news: the card issuer can no longer hike your interest rate without warning or raise rates on an existing balance. They have to send your bill at least 21 days before it’s due (up from 14 days). And each bill has to show how long it will take to pay off the balance if you make the minimum payment–and how much you’ll pay in interest if you do that. Call it the credit card equivalent of the Surgeon General’s warning.

These reforms–and many others–are due to a single new law, the Credit CARD Act, which came into effect last month. Great! Who hasn’t been surprised by one or more of these practices?

“This new law is good, and it does stop a lot of bad things,” says Kathleen Day of the Center for Responsible Lending, a consumer watchdog group which published a handy guide to the new law. “But it doesn’t stop everything, and you know they’re going to find new ways around it.”

Why do the card issuers play these games? It’s not because they’re jerks and like watching you suffer. (That’s a side benefit.) They do it to make money. Take away these revenue streams, and the card companies aren’t going to roll over. Right now they’re rubbing their hands together and coming up with new schemes.

Let’s be like the writers on 24 who sit around coming up with hypothetical terrorist attacks, and figure out what the credit card issuers are going do next.

A crackdown on deadbeats

A deadbeat dad is one who never pays his child support on time. But to a credit card issuer, a deadbeat is just the opposite: a customer who always pays on time and therefore never pays any interest.

Interest is the single biggest chunk of credit card profits. The card issuers have always done their best to turn deadbeats into debtors. Got a pesky customer who always pays on time? Make sure their bill arrives a few days before it’s due, then, when they pay late, slap a 30 percent penalty APR on their entire balance.

The CARD Act makes it harder to pull this maneuver off: they have to send you the bill earlier, and you have to be 60 days late before they can jack your APR. But you can still blow it the old-fashioned way: occasionally pay less than the balance due.

“The house is making a bet that you will not live up to your intentions,” says Chris Farrell, author of The New Frugality and economics editor at American Public Media’s weekly radio show Marketplace Money. “If you will pay it off at the end of the month, and you can pay it off at the end of the month, and you actually have that discipline, it’s a really good deal. The strategy doesn’t work if it turns out you do it every other month.”

If you do show steely discipline and pay in full consistently, the card issuer is now likely to reward you by lowering your credit limit or canceling your account. Happy trails.

Here, have some rewards

That’s not to say that reward cards are going away. In order to explain why credit card issuers love reward cards, I have to use a term that will make many of you close your browser in disgust. It’s not dirty, it’s boring: interchange fees. Although, when you think about it, it does sound kind of dirty.

When you swipe your card for a $100 purchase at Urban Outfitters, the store doesn’t receive the full amount. A few pennies go to Visa (or MasterCard or Amex). A much larger chunk, 1 to 3 percent, goes to the bank that issued the credit card. This is the interchange fee.

The interchange fee isn’t the same on all transactions. It depends on a lot of factors, one of which is whether you’re using a reward card: reward cards carry higher interchange fees.

So, thanks to the CARD Act, you’ll be receiving more junk mail advertising reward cards (especially if you have a high FICO score). They’re a great deal for the banks: higher interchange fees; reward cardholders charge more than the average person, to maximize the reward; and a significant percent of the rewards go unredeemed. Got some useless air miles sitting around? Join the zero-mile-high club.

Oh, they’ll surely be hiking interchange fees, too. And since merchants aren’t allowed to charge customers extra for using a credit card, everyone will pay more–even cash customers.

Fees, fees, fees

“People are going to see many more fees,” says Kathleen Day. Here are a few favorites:

• Annual fees. The classic, and more popular than ever–especially for cardholders with low FICO scores.
• Inactivity fees. Some banks charge you an annual fee for not using your card or not using it enough. Damned if you do, et cetera.
• International exchange fees. As the New York Times reports, card companies charge up to 3 percent every time you make an international purchase–even if the purchase is in US dollars.

Payday…for the banks

Subprime mortgages are over. Credit card profits are down, thanks to debt-wary consumers and new laws. Even overdraft fees, a bank’s bread and butter, will be curtailed later this year. What’s a poor bank to do?

How about payday lending? As BusinessWeek reports:

Banks including Cincinnati-based Fifth Third Bancorp, San Francisco-based Wells Fargo & Co., the fourth-largest U.S. bank, and U.S. Bancorp, based in Minneapolis, are already making such loans, usually from $100 to $500, at annual rates of 120 percent if repaid in 30 days. They’re known as “checking advance products.” That puts them in competition with so-called payday loan stores.

Lovely.

Opt out

In short, the CARD Act is good news, but credit card issuers still want to stick their hands far enough into your pockets to untie your shoes. What to do?

“Reward companies that provide a good service at a good price, and don’t do business with the ones who don’t,” says Farrell. “I hope credit unions and community development banks, which offer credit card products that are pretty simple and straightforward, take market share away” from the big banks. My credit union offers a simple, no-fee credit card at a competitive rate, but I don’t actually carry it. I did, however, sign up for their overdraft line of credit. If I ever were to need emergency cash–up to $1000–I can dip into the line of credit at a fixed 8.9 percent APR using my debit card. There’s no additional overdraft charge. (I’ve never used it.) The watchword with credit cards is the same as it ever was: check your statement for surprises and your back for knives.

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