The money market is a 1 trillion market (annual turnover) and a crucial component to help implement monetary policy by the Bank of Canada.

Types of financial instruments traded include:

- Government of Canada Treasury Bills (T-Bills)
*Note - Bank rate is upper end of operating band.

- Short-term government bonds (less than 3 years to maturity)
- Provincial and Municipal short-term notes and T-Bills
- Day-to-day loans, PRA's, and SRA's
- Note - Special PRA's and Special SRA's (repos and reverse repos)
- Purpose is to put downward/upward pressure on rates.
- Call and Short Loans (from chartered banks to securities dealers - at prime rate)
- Chartered Bank Deposites
- Term Notes
- Deposit Certificates (CD's)
- Swapped Deposits (to us)
- Forward Contracts (like futures yet with private party transaction)
- Interbank funds
- Finance Paper (packages of instalment debt contracts held with customers)
- Corporate/Commercial Paper (30 day notes)
- Bankers' Acceptances (30-90 days, bank assumes risk)
- Guaranteed Trust and Investment Certificates (GIC's) (Better than normal accounting)
- Repurchase Aggreements (repos)
- Resale Agreements (Preverse Repos)

Key Money Market Instruments Outlined is a post from: Discuss Economics Blog

- Savers- Surplus sectors of economy (typically households)

- Borrowers - Deficit sectors of the economy (non-savers)

- Economy as whole; borrowers borrow what savers save: SAVINGS = INVESTMENT

- Financial assets held by savers must always equal borrowers liabilities.

- Financial Intermediaries (Banks, investment firms, or other financial institutions) pool the savings of many people and lend to worthwhile borrowers.

Some Benefits of Intermediation:

- Life cycle model of consumption - showes typical consumption and saving patterns in life.

- Due to economic of SCALE (amount) and SCOPE (size), financial intermediaries match savers to borrowers efficiently and effectively and:

1) Earn good return
2) Contribute importantly to economic growth

Difficulties of lending for an individual:

1) cost of locating borrower
2) Obtain credit history
3) Rish of default makes diversification necessary

[tags]financial intermediation, intermediation[/tags]

Intermediation: Matching savers to borrowers is a post from: Discuss Economics Blog

The move emphasized the relative strength of the Canadian economy. Note, we did say relative strength, as given hardship in our primary trading partners (less China) the economy is growing at a fickle pace.

The increased interest rate is one sign of strength, however, the comments on the slowing growth provided mixed signals for the market.

Usually when the interest rate appreciates the demand for domestic currency increases. However, the declining prospect for the upcoming months actually pushed the Canadian dollar lower.

Some economists are predicting there is enough momentum in the domestic economy to justify another rate hike or two before the end of the year. Although some question whether the moderate growths in job creation are really an indicator of economic strength.

Inflation will stay near the central bank’s 2-per-cent target throughout the projection period, policy makers said, but the economy won’t return to full capacity until the end of 2011, or six months later than they had forecast in April.

Bank of Canada Increases Interest Rate by .25% is a post from: Discuss Economics Blog

Welcome to the comprehensive and continually growing recession resource courtesy of DiscussEconomics. You are going to find practical tips on how to reduce your spending, save money, and ways to come out of our recession in a better position than you went in. At the bottom we've highlighted total average savings to give you an ideas of how much money you can save by applying the following simple steps.

Visit our resources and discover how you can take control of your finances!

1. Save hundreds on your INSURANCE PREMIUMS. Did you know that if you've started to drive your car less because of the higher gas prices (which aren't so high at the time of this writing) you could be in-line for a rebate in your premiums. Moving from a regular to casual driver can save you cash.

There's more, what about home insurance premiums? Chances are your deductible sits around $500 bucks. When something breaks and it's less than that number you won't bother calling the insurance company to claim. However, when items are marginally higher, say 600-1000 you tend to avoid the insurance company. Usually you only approach the insurance for the loss of something huge, valuables, hot-water tank, or other big ticket items.

While you're at it, try shopping around for another insurance policy. Competition may have lowered your premiums with another firm for the same coverage.

Why not increase your deductible to $1000 or even $1500. The savings could be more than $50/month and on average $20. Average expected savings: $200-400/year

2. Turn off your lights and computers! Unnecessary power consumption can fatten your electricity bill. Most people can save at least 10% per month by simply turning off lights when leaving rooms and not leaving appliances/electronics on when unused.

If you're really committed to power consumption then shut off things like modems when not in use, turn off computers completely when unused, and so forth. 75 percent of the electricity used to power home electronics is consumed while the products are off, according to the U.S. Department of Energy!

You can track how much you'll save by replacing your bulbs or turning off your lights by visiting this link.

3. GO GREEN! Energy saving appliances and lights. Remember that 60 watt bulb that produces 95% heat and 5% light? Well change that bulb to an energy efficient 7W model and save money.

You can also consider energy efficient electronics. The price tag on some items are quite high, however, the saving touted outweigh original cost. Take for example the spin dryer that retails for under 600USD (less than a new dryer) and touts a savings of $300/year on average. Albeit, your loads will be smaller, if this little spinner can last for ten years that's $3000 in electricity savings and a reduction of your carbon footprint!

Save money and be eco-friendly! Check out Energy Efficient for interesting items available to the US. In Canada, you are eligible for certain rebates for hitting a certain level of energy efficiency in the home. Check out the government's web site for province specific offerings.

4. EAT WELL, EAT IN Eating in rather that going out for meals will save you 50-75% per meal. For a family of four that's a savings of 50-75 dollars per meal. Let's say you eat out like this even once a month, you are bound to save 600-900/year.

Let's assume fast food eating rather than dining. That would run about $40 for a foursome to a savings of 15-25 dollars per meal. If you eat once a month you can save 180-300/ year; eat out twice a month at fast foot joints you are slated to save 360-600/year.

Remember I am calculating opportunity cost, which means this is your savings between eating in and eating out, you still have to buy food to eat at home so you don't save the entire cost of not eating out.

Total average savings? 1 per month: dining out 50/month or 600/year; fastfood 15/month or 360/year.

5. DINE OUT COUPONS. If you must dine out then save money using 2 for 1 coupons. Your city has tons of them in this book: Entertainment.com. Your savings are almost 50% per outing. Go out once a week for a party of two? That's usually 30-60/outing x 4 = 120-240 month.

Cut that by about 40% by using coupons and you save $48-$96/month or $576-$1150/year.

6. Staying on the topic of food you can save 15-25% on your FOOD BILL per trip if you follow some basic rules. For instance, if you are less picky with what meats and brands to buy, you can buy what's on sale rather than preference. Buying what's on sale or no-name brands will save you 20% easily. By the way, the coupon will give you additional savings so don't hesitate to get out the clippers.

Make sure you go shopping with a list so you don't pick up unnecessary items as your eyes get big. Not shopping on an empty stomach may save you some cash too. So for a family of four your bill may be around $600/month.

Total average savings for no-name and sale items? About 25% or $150/month or $1,800/year.

7. Adjust your CREDIT CARD and spending habits. Credit card use took an unexpected downturn, it has been declining since about November 2008. What's happening? People are no longer putting larger purchases on their credit cards. Why is this a good thing?

The vast majority of Americans have no idea how to properly use credit cards. They assume it's free money, what they don't know is the detrimental effects of maintaining a balance. Here is a basic rule for handling credit cards: do not put anything on a credit card you don't already have the money for.

If you need money to buy things go to the bank and get a loan that's half the interest rate. People won't do this because A) the bank will ask questions why you really need to splurge on furniture or electronics, and b) people are usually too embarrassed to face scrutiny.

Tips for Handling Credit Cards

• Dos and Don'ts of Using Credit Wisely
• View your account activity online and monitor your credit card balance and pay your bill online.
• Start out with just one credit card, why do you need more other than to get yourself into money trouble. Have one credit card you use regularly, perhaps one for business, and one as a backup you use. Most people only need and can only handle one credit card, any more is being greedy and can lead to financial destruction.Another link to help: How Many Credit Cards is Too Many
• Every SINGLE application to for a new credit card, even if you cancel right away, has a negative impact on your credit rating. Yes you can build credit with credit cards, but that's only if you use them correctly. Most people harm their ratings by continually adding cards. Browse the Opt-out of Credit Card Offers
• Living on the edge? You should have a nest egg of cash, take the pain of not eating out for a couple of months to accumulate some funds. Many financial advisers suggest 6 months of expenses in savings. If you do take on a balance then pay if off in full as soon as possible. Save yourself more heartache by not putting anything else on that credit card.
• Here are some more tips on paying off your credit card debt. Five Principles of Making Credit Card Payments. The interest rates in credit cards are meant to be crippling for those who have bad spending habits. Usually around 20% is the average interest rate, therefore making minimum payments is not a service to you, but a way for companies to make money off of your slow payment.
• When paying off an existing balance try to pay the highest interest rate first. You may also be able to pick up momentum by paying off the small balances if there is a sizable gap. However, if you have the problem of small and large balances then you made the mistake of getting too many credit cards.
• Go for a balance transfer to a lower interest rate. Many times a credit card will offer an interim low interest rate for X amount of months. You transfer for over, and instead of 20% a month, you'll pay perhaps 4% for six months. You'll get 6 months of 16% less interest out of the deal. There is, however, a negative to this process. If you don't already have a credit card offering this promo (that doesn't have a balance) then you'll have to apply for another card which will adversely affect your credit rating. Furthermore, if you've transferred there may be a 'catch' on new purchases using that card, so it may be best to cut it up.

Expected Savings: Depends on how much you can control your bad spending habits.

8. CONSOLIDATE DEBT. Rather than point you to one of the countless web sites out there that try to sucker you into a debt consolidation deal here is some practical advice. The point of debt consolidation is to combine all debts under one roof and hopefully reducing your interest rate for some. You'll pay the same interest rate, for everything, rather than 10 different interest rates for 10 different debts.

This is a good thing since you can now put more money towards the principal (initial borrowed amount) per month. However, the extra cash you save isn't supposed to be your new disposable income windfall. Debt consolidation is a two step process.

Step 1. Consolidate your debt.
Step 2. Use the money you save each month and invest it properly.

You've taken the interest money you would have been paying, and are now making interest on it. Initially you don't make much interest, but as time goes on you end up making some good cash. Depending on the size of your debt you can expect to pay off all your debts months to potentially years earlier.

Expected Savings: Depends on your debt size.

9. DOWNGRADE UNUSED TECHNOLOGY and FEATURES. Chances are you don't need super high-speed internet, or in the very least you won't notice a change if you downgrade. How about your TV? Do you really need all those channels? The phone features really necessary? Cell phone features you don't use? Cut back on things you don't even consume consumers!

Many hi-speed internet providers have varying high-speed speeds. I know it doesn't make sense, but unless your downloading video all the time, checking the email and surfing can be done on basic hi-speed. Save the ten bucks a month.

Cable packages/satellite can run from 25-75/month. Downgrade and eliminate channels you don't watch, save at least 20/month.

Move your phone to VoIP. Skype will give you free outgoing calls all over North America for $35 bucks. The only catch is you need to have hi-speed internet and a microphone (still cheaper than any long distance plan). You can also take out the unnecessary calling features like call waiting.

Cell phones also have tons of features you may not need. Perhaps you don't even need both a landline and a cell phone. Think about taking out a feature package and save $10 / month.

Total electronic savings: $10-15 internet + $10-20 TV + $3-8 phone + $5-10 cell phone = $28-$53/month or $336-$636/ year.

10. Adjust your DRIVING HABITS. Did you know that having properly inflated tires can save 5% on your gasoline consumption? That by not flooring the gas peddle at starts you can save 10% off your fuel consumption? That's 15% savings per tank of gas, not too shabby if you're driving a gas guzzler. For more tips on how NOT to save money on gas read our other post on the topic.

Total savings per tank: 5-15% or $5-$15/month on spending of $100 of gas ($60-$180/year).

11. CONTRIBUTE RRSP's. Not only is this the right time to buy if you're not within 5 years of retiring, but you can also reduce the amount of taxes you pay by contributing to your deduction limit. Here are some basic introductory tips from the government of Canada's web site on RRSPs.

(Remember you are taxed on the RRSP and gains when you withdraw from your accounts. There is a provision in Canada to withdraw early without penalty if you're buying a house.)

So if you have the room to invest then do so, if you have even more income and want to further reduce the amount of taxable income then consider contributing to your spouse's RRSP account. Remember this is for long term investments, you shouldn't be thinking about withdrawing this money in the near future especially if you're young.

If you're closer to retiring then safer options that don't have the same short-term risk are an option. Within 2-3 years of retirement look at GIC's (guaranteed investments). As you get closer, reduce risk. If you're young and want to do RRSP's (long term) then DO NOT invest in GIC's. That's just a chance for your bank to earn crazy money off your investments in interest while you get 3%.

For guaranteed and tax free accounts there's always the latest instrument for Canadians -- the TFSA.

12. Use your TFSA room. Canadians have a new investment tool called the TFSA or tax free savings account. It doesn't actually have to be a savings account with a bank, but all gains are still tax free regardless of where and what up to a maximum of $5000/year. That means how much you put in is rolled over for a fresh $5K cap room each year. That doesn't mean you can invest $10K in year two if you didn't put anything in year 1.

It also means tax free withdrawals. If you want to buy a house and you have 8 years of maximum TFSA contributions (so 40K), then you can withdraw the entire amount and in year 9 you will still have room for 40K plus 5K to re-contribute into the tax free account. Depending on where you're at in life and what financial responsibilities you'll have in the near future will dictate whether you go the route of the TFSA or RRSP.

13. STOP ADDICTIONS. Easier said than done sure, but how about one that you can manage? Rather than purchasing coffee from your favorite store, brew at home and carry a travel mug. Sound pathetic? Think about the savings. Coffee ranges from 1-5/cup. You drink at least one a day fives times a week (we're being modest). To brew at home costs filters and coffee beans. The expected savings is .5-4.5/day.

While you're at it, cancel memberships and unused rentals. You don't go to the gym so why bother paying for it?

Expected savings: .5-4.5/day x 20 days (month) = $10-$90/month or $120-1008/year.

14. Save $2,056 in one weekend with common household upgrades and adjustments like selling unused items, energy efficient appliances and bulbs, and my person favorite: drinking tap water instead of bottled (assuming you have safe water).

Heat may be another thing, whether it's gas, electric, or fire, suitable insulation will ensure you aren't bleeding off heat in the winter. Find the nooks and crannies that let cold air in and fill them. For large houses, consider shutting off vents in room you're never in (like the basement).

15. IT'S TIME TO SAVE AND INVEST. Although you have a better future if you're further away from retirement, the old adage still holds true, by low and sell high. Right now, prices have never been lower. You can buy equities (stocks) of profitable firms for bottom basement prices. Don't put all your eggs in one basket though, you still need money to be accessible in the short term. You also don't get the option of professional management if you're doing this yourself.

Might we recommend equity mutual funds? This would be a great time to buy and you have a month left (in Canada) to contribute to your RRSPs (end of February to reduce taxable income of 2008). You can have a number of different instruments in your RRSP, but equities should be in your portfolio especially if you're under 40. Many have lost of 50% of their current equity (house and stocks). However, if you have the income to buy more, then you could come out of this recession smelling like roses.

Recession Savings Recap

So how much can you save in our growing recession resource collection? Here's a summary:

1. Save hundreds on your INSURANCE PREMIUMS: Average expected savings: $200-400/year

2. Turn off your lights and computers!

3. GO GREEN! Energy saving appliances and lights. Savings depends on your appliances.

4. EAT WELL, EAT IN: Total average savings? 1 per month: dining out $50/month or $600/year; fastfood $15/month or $360/year.

5. DINE OUT COUPONS: Cut that by about 40% by using coupons and you save $48-$96/month or $576-$1150/year.

6. You can save 15-25% on your FOOD BILL per trip: Total average savings for no-name and sale items? About 25% or $150/month or $1,800/year.

7. Adjust your CREDIT CARD and spending habits: Expected Savings: Depends on how much you can control your bad spending habits.

8. CONSOLIDATE DEBT: Expected Savings: Depends on your debt size.

9. DOWNGRADE UNUSED TECHNOLOGY and FEATURES: Total savings: $10-15 internet + $10-20 TV + $3-$8 phone + $5-$10 cell phone = TOTAL $28-$53/month or $336-$636/ year.

10. Adjust your DRIVING HABITS: Total savings per tank: 5-15% or $5-$15/month on spending of $100 of gas ($60-$180/year).

11. CONTRIBUTE RRSP's: future wealth:

12. Use your TFSA room: Future Tax savings.

13. STOP ADDICTIONS: Expected savings: .5-4.5/day x 20 days (month) = $10-$90/month or $120-$1008/year.

14. Save $2,056 in one weekend with common household upgrades and adjustments

TOTAL SAVINGS ABOUT: MONTH=$451-$625.83 or YEAR=$5,578-$7,510

We didn't even calculate some of the biggest savings such as managing your debts properly. Since every person has different needs it's hard to determine an example. However, that will be one of your biggest money savers as you dwindle down your debt load.

Enjoy our list and share it with your friends! Post your ideas below in the comment section as well and happy savings!

Save $7510 per Year – Recession Resources is a post from: Discuss Economics Blog

Introduction to Microeconomics

There are fundamental assumptions when using microeconomic models while you're trying to explain consumer and market behaviour. Firstly, firms (businesses) are assumed to operate with the fundamental intention of maximizing profits. Here are some more terms that are useful:

Total Revenue (TR):

Is the amount that firms receives for the sale of its product
TR = Price x Quantity
= P x Q

Recall that a firm's cost of production include:

Explicit costs - direct money outlay for factors of production.

Implicit or "imputed" costs - Do not involve a direct money outlay.

Cost-output relationships

Fundamental point in cost analysis

***A functional relationship exists between the costs of production and the rate of output per period of time (ie. productivity)***

Cost function:

Indicates what the cost will be at alternative output rates

Cost = f (output)

But we know from our production analysis that:

outputs = f (inputs)

***Consequently, the level and behaviour of costs as a firm's rate of output changes depend on:

1. The character (shape) of the production function;
2. The prices the firm must pay for its inputs.

[tags]intro microeconomics, introductory microeconomics, microeconomics, cost production[/tags]

Principles of Microeconomics Introduction is a post from: Discuss Economics Blog

This means that they may underestimate how much money is actually needed for retirement and when the time comes, the individuals are typically at an age to which they can not sufficiently make large amounts of money again and therefore may rely on social programs that puts a burden on the working generation. An externality effect may be that if too many people do this, the economy may suffer due to the fact that there are too many dependencies in the form of liabilities, thus causing the economy to grow less quickly because the money spent on retirees could have been re-invested in the economy instead.

Hyperbolic Discounting Explained is a post from: Discuss Economics Blog

A chemist, an engineer and an economist joke is a post from: Discuss Economics Blog

Here is what one user responded with.

Event A. Since you need chips to make computers, a decrease in the price of chips means that people will buy more computers. This will shift the demand for computers outward, as shown by A

Event B. When incomes fall, the demand for inferior goods shifts outwards, while the demand for normal goods shift inwards. This is intuitive because when you have less money, you demand more cheap goods. The best answer for this one would be B, because the Supply-Demand curves shows the demand for normal goods shifting inwards.

Event C. When the price of margarine rises, people will not want to buy it as much as they will buy butter. Therefore, the demand for butter will increase because butter has become relatively cheaper. You want to look for the graph of the butter market. This curve should show an outward shift in demand. Ergo, the right answer is A

Event D. When the price of office buildings goes down, producers will be less willing to supply it. If you have the resources to build two goods, say a dell mp3 player or an ipod, and the ipod sold for more money, you would probably want to produce ipods, other things equal. The Building Firm works off of the same principle. Thus, since the schools are relatively more expensive to buy, the firm will want to supply more of them. The correct answer for what happens to the market for school buildings would be C

Event E. Use the same logic that applied to Event A to get this answer.

Introduction to Supply and Demand Curves Example is a post from: Discuss Economics Blog

US politicians and lawmakers are pushing hard for China to revaluate their currency. Why is this important? By revaluating China essentially will force their currency to appreciate. Once that happens their goods become comparatively more expensive to purchase. The economy in China will slow as less countries demand their products. For China this is undesirable if they have the demand to continue their breakneck expansion. On the flip side, it will help America address their trade deficit woes.

But then again, the US has threatened before and nothing has happened, maybe because their economy clout is gone and China is now the powerhouse? I don't think it's quite at that level, so maybe this time we'll see some fireworks....

Here's what we posted about this situation three years ago, so there's not indication that these latest threats will do any good.....

Is the honeymoon over? Have countless opportunities to revaluate the currency left China vulnerable? China's stock market suffered its biggest single-day drop in more than 10 years on Tuesday, sending resource stocks in Toronto falling sharply in morning trading.

The Shanghai Composite Index fell almost 9 per cent to close at 2,771.79 -- its largest single-day decline since it fell 9.4 per cent on Feb. 18, 1997 after the death of Communist party elder Deng Xiaoping.

The drop is attributed to profit-taking and speculation of a fresh round of austerity measures from the Chinese government to slow sizzling economic growth.

The Toronto stock market fell more than 200 points early Tuesday morning, as investors worried that the plunge in China could also mean a sharp drop in demand for metals and oil.

Economic data also weighed on the markets. U.S. orders to factories for big-ticket manufactured goods plunged in January by the largest amount in three months.

[tags]china economy, china bubble, china's foreign exchange, china revaluation[/tags]

China Bubble About to Burst? Time to Revaluate the Yuan? is a post from: Discuss Economics Blog

so......i tried to answer someones question on a media/politics message board on this issue...

the guy was asking why are mainstream or corporate media companies are so keen to follow the government line on terrorism (sometimes abbreviated to MSM, mainstream media, in contrast with the growing alternative media market, i use the term traditional media too)

he thought that it would reduce "consumption" (his term) by scaring consumers into not spending money and therefore advertisers would`nt like it and should put pressure on media corps to change their coverage. (to become more reasonable and less alarmist about the issue)

he proposed..."how does this (alarmist terror coverage) increase consumption which is the aim of advertising in the media?"

I thought his confusion was due to the terms of his question (like wittgenstein said, if you cant answer a question there is something wrong with the question......i dont take this as an absolute rule but it holds true in many circumstances)

here is my post in reply to him.....(i would appreciate a brief comment about whether i am on the right track, be honest please!!, if its bad its bad etc and i dont want to put about false arguments so i should adjust it if its wrong etc but everyone else had crashed on the rocks trying to answer his question so i took a deep breath and had a go)

.................................................................................................

right, im not an economist but i'll have a go at discussing the subject (im teaching myself at the moment, if there are any more knowledgable on the subject reading this then please post if my analysis is flawed or whatever)

firstly advertising is not solely about selling products and services, think about political ads (a big industry in the u.s., not so much in the uk but still a factor) and charities advertise too, i cant produce a comprehensive list of ads which are not product or service based but there are enough different types to challenge this premise in your question daniel (in my opinion)

so media products which survive on ad revenue are not soley reliant upon product/service based sources. (although i would think its the major share)

secondly, you say that advertisers wish to increase the level of consumption.

yes and no, those who sell products or services wish to increase their market share and increase demand for their products/services, not overall consumption as such. (managing levels of consumption is the job of government fiscal policy, and in global terms its the job of macro economic institutions like the IMF amongst others to research the issues and advise governments etc, they were set up after the war to avoid great depressions etc, at least thats part of what they claim to do, we all know there is alot more to the bretton woods gang than that but thats another story)

according to the IMF and other macro economists the u.s. and the u.k. populations are consuming too much and not saving or investing enough, while the converse is true of china. (their risk averse tendancies are helping to fuel the spending binges of the anglo-americans, this is a source of global economic instability)

so consumption as an economic factor or indicator must respond to domestic and global need/situations and grow in proportion with other factors. (overall GDP growth is definately wanted by governments, industry and advertisers etc)

so its not the case that industry or government or advertisers wish to see an increase in consumption per se, they do but only if this increase is part of a balanced growth overall. (although some short term-ist flyby nights might not be bothered about overheating the economy till it collapses, i dont think this is the majority view however)

if we contrast consumption with investment or savings we see that both industries are advertisers, banks for instance advertise savings and investments and pension plans etc etc while car companies and retail chains for example advertise products for sale etc etc, so advertisers are both champions of consumption and saving/investment, some like banks offer both, selling credit products on the one hand and investment or savings products on the other, people have to do something with their money remember, they cant keep it under the bed or it will lose value due to inflation, they have to spend it or save/invest it, this happens regardless of terrorism)

thirdly your question seems to imply that levels of consumer demand should be dropping because of this terror situation, have you checked the figures? (retail would be a good one to look at), however if there is slight downward trend you would find it difficult to analyse why that is happening, and would probably conclude rising energy costs and local taxes and possible inflation fears and interest rate rises would be the cause. (and in terms of advertising it makes little difference, energy companies advertise too remember)

so to conclude, i dont see how this terror situation is going to reduce the overall ad spend significantly enough for the media to reduce its support for the political establishment.

The thing that is hurting the traditional media at the moment is the internet primarily, there has been a fragmentation in audiences and readerships etc, and the advertising industry is trying to adjust to the new situation and to find spaces to put its ads online. The newspapers are considering raising their cover prices to make up the drop in ad revenue while trying to increase their online presence to catch that market, Tv companies are also trying to get their share of the online market, and look at murdoch buying Myspace, this isnt even news or entertainment, its networking communications(although his empire is not sure how it will make real money out of it yet), the tradional media are worried that they wont be able to keep up their high budgets and profits unless they can find ways to preserve their ad revenues or find other methods for making money, i think this is due to technology not terrorism, check out the interview with alan rusbridger from the guardian which is posted in the video thread, he discusses how they are trying to make up for lost revenue and how much money newspapers are losing at the moment)

Is Terrorism Reducing Advertising Demand? is a post from: Discuss Economics Blog