Depression is not by its very nature a happy subject, but with the pressures put upon us all in today’s world it is unfortunately only too common. To many people who have never experienced it, an instant cure should be possible simply by telling the sufferer to ‘snap out of it’. Sadly the depressed person would be only too happy to be able to comply, but they cannot, for a variety of reasons better known to the psychiatrist than to the layman.
There are many different forms of depression and they manifest themselves in a variety of ways, ranging from what can appear to be ‘just nervousness’ to an overwhelming desire to solve all the problems which are crowding in by committing suicide. It is called the ‘cowards way out’ – a description which takes no account of the individuals state of mind when contemplating or taking this terrible step.
Suicide leaves an unanswered question – should the estate of the deceased be able to profit from their death by claiming payment of life insurance? Here we head into some very murky waters, with some very different points of view being held. Of course a conventional death should give rise to a payment – that is what life insurance is all about – so should the manner of death make a difference? Why should self inflicted death be subject to a different result? Is there not a possibility that we are setting ourselves up for extended and costly enquiries where the death could have been deliberate or an accident i.e. a motoring fatality where the car hit a wall?
Then there is the question whether suicide is illegal or not in the UK, and it is a problem trying to find someone with the definitive answer, although it is very clear that assisting in a suicide is definitely not legal. If suicide is illegal, should an action outside the law be able to profit someone, even though they had no direct involvement with that action? Murky waters indeed.
With more than 20,000 deaths by suicide in England and Wales over a four year period, which is double the number of road fatalities, the above questions are rather more than academic. What about the reaction by the people ‘at the sharp end’, that is the insurance companies who have to determine whether payment should go ahead?
Here too opinions vary. Some will pay out only if the policy was taken out a ‘reasonable’ length of time before the suicide; ‘reasonable’ being translated in most cases as being 2 years. This period is applied to the policy to avoid fraudulent claims, where the intention to commit suicide was present at the time that the policy was taken out.
Anyone who has attempted suicide at some time needs to declare the fact on their application form, says a spokesperson for the Association of British Insurers. This may bar them from life insurance with some companies, or may cause a significant increase in their premium costs. The approach to them by the insurers will be to treat them as they would treat a psychiatrically ill applicant.
Although Standard Life has paid out on life policies held by people who subsequently prove to be successful suicides, they operate on the same principal although without applying the time limitation clause. It is their intention to thoroughly assess the risks before the cover is agreed, with any previous suicide attempts limiting or excluding the cover.
Your doctor’s notes are invaluable to a potential insurer, providing as they do a medical history which will point up any aberrations which may be a sign of potential suicide risk. It is equally possible that they will show that any depression is not a serious underlying state and that your risk factor is low.
Depression on its own is no reason for a life policy to be refused, nor indeed is a previous suicide attempt necessarily a bar. You will need to find a broker with whom you can have a discussion which will cover all aspects of your illness or depression. You need to be absolutely frank and conceal nothing of previous suicide attempts and any previous or subsequent treatment whether as an outpatient or not.
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Filed under Finances by on Dec 3rd, 2008. Comment. 
It’s difficult to predict what the next bubble will be, or when it will develop. But there are “early warning signs,” that, like the tiny crocus flowers that push through snow cover in early spring, point to changes ahead. One of the most important harbingers is an abundance of liquidity.
Markets are driven, in a very real way, by liquidity — a high-toned word for plain old cash. The song lyric from Cabaret, “Money makes the world go ’round,” has never been more true than in recent years. From the supply of money flows credit decisions that grease the wheels, not only in financial markets but economies in general.
In simple terms, central banks and governments control the supply of money and credit through two “spigots:” monetary and fiscal policy. Central banks control money supply by managing short-term interest rates. Governments do it using taxation and public spending.
To balance economic growth, one institution may work independent of the other. That is, one spigot may be open while the other is closed. For example, a government might increase taxes, while a central bank reduces interest rates to mitigate the impact of those taxes.
However, to slow down an overheated economy, both interest rates and taxes oft en move higher, to reduce the money supply. To stimulate growth, on the other hand, both spigots can be open. You will then see the government lower taxes and the central banks lowering interest rates.
Our objective here is not to turn you into an economist, of course, but to give you a simple way to see how the ebb and flow of money is controlled, as central banks and governments turn the taps on and off.
While banks and governments control the supply, in a free market economy the financial markets determine the direction. That means available liquidity (i.e., cash) will flow into investments that the market considers will benefit most from the economic environment.
Watch the needle on liquidity
Problems surface, though, when there is an excess of liquidity — it can spill over and drive the value of investments way beyond their fundamental values, to irrational levels. At the other end of the spectrum, too little liquidity can push investments well below their fundamental value.
The key to spotting potential bubbles, then, is to:
• Monitor central banks and government action to see how
tight or loose the two spigots are that control money supply.
• Try to foresee where the liquidity is flowing. Is it moving away from stocks to bonds, for example, or vice versa? Is all the money going into real estate, or into commodities (oil futures, for example, are at about $120 per barrel now).
An excess of liquidity creates excess demand for an asset, which pushes prices higher, reflecting lower return expectations among irrational participants (who think of themselves as investors, when they are really speculating).
Consumers fuel the liquidity fire, too
Ample availability of cheap and easy credit turns consumers into spendthrift s in record levels, enticing homeowners to tap into the available cash in their home equities and credit cards, and use it to sustain their way of life. Evidence: By the second half of 2005, financial obligations as a percentage of household income stood at 16 percent, nearly the highest on record. At the same time, savings as a percentage of disposable income sank to zero, the second lowest since the Great Depression.
High-octane liquidity sparks liberal and rapid credit creation, which in turn inflates asset values beyond rational norms. The result? An uncontrollable, global-scale liquidity flow that pushes asset values, particularly real estate, commodities and emerging market debt to over-rich levels.
It is liquidity overflow that fuels all of this activity, and turns everyday people into unsuspecting speculators, if not gamblers. People looking to “make a killing” often dive into risky assets like emerging countries’ stocks and bonds, real-estate backed debt, fine art, private equity funds — and sophisticated investment contracts even bankers can’t understand.
The difference is that experienced speculators will walk away when a miniscule risk premium signals low compensation for high risk. The Wall Street Journal explains it well: “…as the price of an asset rises, the income it throws off — a stock’s dividend, a bond’s coupon, a building’s rent — automatically declines as a percentage of the asset’s value. This means investors are demanding less compensation than usual for taking on the risk inherent in owning the assets.”
In plain language, the risk premium needs to be high enough to compensate for the possibility that you will not get the return you expect (and might even lose your principal). What happens in bubbles, as we have seen in evidence dating back to the 17th century, is that sky-high prices, like the mythical Icarus, fly too close to the sun and inevitably fall back to earth.
Co-authors Jose D. Roncal and Jose N. Abbo share some 50 years of senior executive experience in international business, finance and economics. Both have authored numerous articles on business strategy, finance, accounting, capital markets and the global economy. For more on the authors and their book, The Big Gamble: Are You Investing or Speculating?, visit: Financial Speculation.
Filed under Finances by on Nov 29th, 2008. Comment.
Throughout the decade, the economy has faced some drastic changes. Unemployment is on the rise, businesses are closing down, and the real estate market is a disaster. Some would argue that this has a lot to do with the government and the presidential administration that has been in office throughout most of the decade.
What will make us change? Will the new president and his administration make the difference for our economy today? Hopefully some major improvements are in the works!
And what impact do the real estate market and stock market have on the average person’s relationship with the economy? First of all, if the economy goes down and everything (such as gasoline) becomes more expensive—and in the meantime, there is more unemployment and less available jobs than ever before—there is a major impact on the ability of a lower or middle class family to afford a house payment. Foreclosure is a very serious reality that sets in.
The stock market has been taking a turn for the worse. The government has stepped in to try to prevent the stock market from totally crashing. Their rationale is that if they help out the businesses on Wall Street, the families on Main Street will be able to maintain good standing with their bills, loans, mortgages, and so on. No one wants to see our country remain in a recession or ultimately face the possibility of our economy sinking into a depression.
Is the government doing enough? Should we be nervous? What can the average person do to ensure the economic safety and security of himself/herself and his or her family in the midst of today’s struggling economic conditions?
The most important thing for the average person to avoid doing is resorting to a state of panic. Panic will cause chaos, and will cause our economy to quickly dissolve into nothing. Therefore, making rash decisions to withdraw from the stock market or to withdraw all of your money from your bank or other investments is just about the worst decision you can make.
If everyone worries that their money is not going to be there when they need it, and gets selfish, they will be creating the very reality which they fear! In order for the economy to be sustained and remain stable, we must not panic. That is rule number one!
There are some decisions that you can make, in subtle ways, which will help ensure your family’s person economic affairs stay in order. It is a good idea to touch base with a financial advisor of some type. This will help you get expert advice from someone who deals with the economy, stock market, real estate market, and investments on a daily basis.
While you may know a little about these types of things, a professional financial expert will know more and be able to guide you through your personal financial situation, so that you can put your mind at ease and sleep peacefully!
Will the economy improve? Will our country be restored to its glory days when it seemed like anything was possible? Yes! We must believe this! And history has proven that sometimes the economy goes through a rut, but it always makes a comeback soon thereafter!
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Filed under Finances by on Nov 29th, 2008. Comment.
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