10 words to understand the economy ahead of autumn

10 words to understand the economy ahead of autumn

Inflation is traveling at a pace not seen since the 1980s, the super dollar has reached parity with the euro and in Italy there has been a resurgence of talking insistently about the minimum wage. The summer of 2022 brought back to the center of the debate some key words that until recently were only read in the business pages of newspapers. And as if that were not enough Elon Musk has blown the takeover bid that he had launched a handful of months ago on Twitter. A small glossary that tries to explain some key concepts of the economy with simple words:

Inflation Buying power Recession Stagflation Minimum wage Fiscal wedge Exchange rate Future Action Takeover sportsgaming.win Finance, the podcast to understand the economy in simple words Eight episodes made in partnership with Invesco every Monday on the main platforms. To explain the secrets of finance in simple words: from the Yolo economy to startups, passing through savings, investments and the metaverse Inflation Inflation is the keyword of the summer and indicates the increase in prices. As Istat explains, inflation "measures the variations over time in the prices of a set of products representative of all goods and services destined for the final consumption of households, which can be purchased on the market through monetary transactions". This year we have heard a lot about it because it has increased a lot, as it had not happened for decades: in June inflation accelerated by + 8%, a level that had not been recorded since January 1986 when the increase in prices was equal. at + 8.2%. In the OECD countries it went worse: + 9.6%. Such a high level of inflation sinks the purchasing power of households.

Purchasing power Purchasing power indicates the gross disposable income in real terms of a family, ie how much and what can be purchased with a fixed amount of income such as salary. Eurostat provides a lot of data on the level of prices within the Union, to photograph the differences between the different markets. Taking for example the cost of food, it emerges that in Italy prices are 8.3% higher than the European average, while they are slightly lower for leisure and much lower for communications: we spend more than 16% on less than average.

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Recession Recession is the specter of every government: it is the macroeconomic condition that occurs when the levels of gross domestic product in a given period of time are lower than the thresholds reached in that period immediately preceding. A sadly popular recession is the one unleashed in 2008 following the subprime mortgage crisis, with the bankruptcy of the US bank Lehman Brothers. Following that crisis, Italy lost 5.3% of GDP in 2009 compared to the previous year and entered one of the most difficult periods in its history.

New York (Photo: Chris Hondros / Getty Images ) Stagflation When two phenomena such as inflation (price increase) and stagnation (GDP growth close to zero) occur simultaneously in a given period of time, we end up straight into stagflation. The first time it was heard of was in the 1960s, especially in the West. Treating stagflation is complicated because the recipes used to contain inflation, first of all the reduction of monetary stimulus, do not help to shake the economy which risks remaining with growth anchored to zero. If not to plunge into recession.

Minimum wage The minimum wage indicates the wage below which no worker can fall. In Europe, many countries have introduced legal forms of minimum wages for years, in order to set clear and equal thresholds for all that cannot be violated. For example in Germany the minimum wage is around 10 euros per hour, as well as in France but not in Luxembourg where you can go under 13 euros per hour. In Italy there is no form of minimum hourly wage by law, but most of the workers are protected by national employment contracts that set the pay scales for the different categories. As INPS revealed, however, there is a large slice of the population that is out of bargaining: "A good 4.3 million workers earn less than 9 euros per hour", explained Pasquale Tridico, president of the institution. social security. For this reason, there are bills in Parliament to uniformly extend the protection of the minimum wage to 9 euros per hour.

Tax wedge The fiscal wedge is talked about cyclically, at least in Italy. The expression indicates the difference between how much a company pays a salary to its employee and how much one actually finds oneself in the current account, between tax and social security charges incurred by the company and by the worker himself. Italy has a very high differential: according to the OECD, 46.5% of the entire salary goes to taxes, less only than France (47%), Austria (47.8%), Germany (48.8) and Belgium (52.6%). For taxes paid on the job, the OECD average is 34.6%, but Italy's competitors are decidedly more competitive: Spain is 39.3%, the Netherlands 35.3%, Israel 24.2% and the very close Switzerland at 22.8%.

Exchange rate The exchange rate is the price at which one currency can be exchanged for another. This rate, as the European Central Bank points out, is subject to continuous variations on the world exchange markets, where currencies of all kinds are traded. The euro is one of the most traded currencies, along with the US dollar, the Japanese yen and the British pound. The summer of 2022 will also go down in history due to the reached parity in the euro-dollar exchange rate: after a few weeks of sharp declines, for the first time since 2002 the Eurozone currency fell to absolute parity (1: 1) with the most popular greenback on the planet. For Europe, parity with the dollar means having more favorable conditions for exports, but it will cause difficulties in purchasing goods paid for with foreign currency from abroad. Including energy.

Futures Futures are forward contracts with which the parties undertake to exchange a certain asset at a predetermined price and with delivery on a certain date moved to the future. These are derivative contracts traded on regulated markets, through which buyers and sellers undertake to exchange a quantity of a certain asset, financial or real, at a predetermined price and with deferred settlement. Technically, Borsa Italiana points out, "it is a symmetrical contract as both parties are obliged to perform a performance at maturity. The operator who buys the future (that is, who undertakes to buy the underlying at maturity) takes a long position , while the trader who sells the future takes a short position ". Futures are used a lot for trading in commodities, such as oil and gas.

FILE PHOTO: A model of the natural gas pipeline is placed on Russian ruble banknote and a flag in this illustration taken, March 23, 2022. REUTERS // File Photo DADO RUVIC Share A share is the minimum unit of participation of a partner in the capital of a company. All with equal face value and guaranteed rights, indivisibility, autonomy and circulation. The shares can circulate freely, even if the law allows the issuing company to define circulation limits such as the pre-emption clause, according to which the shareholder who wants to sell his shares must first offer them to the other shareholders. Some shares, known as multiple voting shares, may be worth a higher number of votes at shareholders' meetings.

Takeover bid The takeover bid (takeover bid) is a proposal to purchase shares of a company listed on the markets. Once launched, the public offer is irrevocable and is addressed on equal terms to all holders of shares subject to the tender. In Italy, with some exceptions, there is an obligation to launch a takeover bid on all company shares "by those who - underlines Bankitalia -, following purchases for consideration, come to hold a stake of more than 30 percent" of the company . There is also a residual takeover bid that is triggered when a single shareholder holds a stake of more than 90 percent, if within four months he has not restored a sufficient free float to ensure the regular performance of trading on the stock exchange.

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