Explanations of "Gold" investment-related terms A to Z

Exchange Traded Funds track the value of a particular index, commodity (for instance a gold ETF tracks the gold price) or currency and its highly liquid shares can be bought and sold just like stocks on the stock exchange. ETFs may be attractive as speculative vehicles because of their low costs, tax efficiency, and stock-like features.

Bitcoin is not the only cryptocurrency game in town. There are plenty of them – Bitcoin is simply the most popular and largest in terms of market capitalization (as of April 30, 2019). But Ethereum ranks second – and according to its supporters, it is better than Bitcoin as it exploits the full potential of the blockchain (which is a digital, public ledger that records online transactions made in Bitcoin or other cryptocurrencies).

Exchange Traded Note (ETN) is a debt security (derivatives) issued by an underwriting bank, whose value depends on the movements of a stock index or some other benchmark. They were created by Barclays in 2006 and have become an alternative to ETFs. Gold ETN is an instrument designed to track the price of gold and silver ETN is an instrument designed to track the price of silver.

If Europe uses euros as currency, should then Africa  use Afros as currency?

The euro is the official currency of the Eurozone, which is a monetary union consisting of 19 of 28 member states of the European Union. The euro was introduced in 1999 as an accounting currency, but physical coins and banknotes entered into circulation in 2002. The currency is managed by the European Central Bank, based in Frankfurt. Its international code is “EUR”. 

Do you know why the Great Depression was so severe? One of the reasons is that many banks collapsed back then, which led to the financial crisis and the decline in the money supply. In other words, much of the economic damage was caused by bank runs. When many clients withdraw their deposits simultaneously from the bank, the bank has a problem, since under fractional-reserve banking system, it keeps only a small portion of customers' deposits in cash. Yes, it means that your money at bank is not really safe.

The Federal Reserve System, or sometimes referred to as “the Fed” is the central bank of the United States. The agency was created through the House Resolution 7883 by Rep. Carter Glass and it came into effect on December 23, 1913 after President Woodrow Wilson signed the Federal Reserve Act. The Fed is entrusted with the responsibility of ensuring that the country will have a safer, more stable, and flexible financial and monetary system.

The United States is a federation of individual states which have the Federal Government to oversee them and run the affairs of the overall federation or country. Thus the Federal Debt is the amount owed by the United States government to various creditors.

The federal funds rate is an interest rate at which depository institutions lend balances (funds maintained at the Federal Reserve) to each other overnight. When one bank has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity.

Fed minutes are a comprehensive record of the meetings, which offer detailed insights regarding the FOMC's stance on monetary policy.

The balance sheet of the Federal Reserve is a statement which summarizes the assets and liabilities of the Fed. It looks like a standard, commercial balance sheet with one important difference: the Fed is able to expand its balance sheet by printing as many U.S. dollars as it wants. Therefore, anything for which the Fed has to pay money (usually U.S. Treasuries), becomes the Fed's asset. The Fed's liabilities (like U.S. dollar bills) are also interesting, since U.S. dollars are not redeemable in gold, but in other U.S. dollars.

A tightening cycle is a cycle of interest rate hikes. The Fed tightens its monetary policy by raising the federal funds rate to curb inflation if it is rising too quickly. In normal times, the U.S. central bank controlled the federal funds rate by changing the supply of reserves via open market operations. When the Fed wanted to raise rates, it would sell securities, which led to a reduction in reserves in the banking system. As the reserves become scarcer, the interest rates increase. However, because of the Fed’s quantitative easing programs, the banks became awash with reserves, so they do not need to borrow funds from each other as they used to before the financial crisis. It means that to raise interest rates by open market operations, the Fed would need to unwind all of its earlier purchases (around $3.6 trillion since 2008). Therefore, the U.S. central bank has been using two other tools during its tightening cycle started in December 2015: interest on excess reserves (IOER) and reverse repurchase operations (RRP).

Fiat money is a currency that a government has declared to be legal tender, but is not backed by a physical commodity. The term derives from the Latin fiat (“it shall be” or “let it be done”) as fiat money did not spontaneously emerge in the free market, but it was established by government regulation or law. Contrary to commodity money, which is money that is at the same time a commercial commodity, fiat money is a legal claim, which derives all its properties from the law. It is neither a commercial commodity, nor a title to any such commodity, so it is irredeemable paper money without any intrinsic value.