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Politics Can Impact The Financial Market

Financial media often add to political hype by presenting people, rumors, or events as if they were all-important for the market. Reports of politicians juggling gigantic sums, and surrounding debts, deficits, surpluses, spending, credits, and big ideas with great fanfare are stirring investor concern. In our opinion, politics does influence the market, but not in that obsessed, party-oriented, and person-oriented way that experts and investors often assume. Forex brokers (https://www.forextraders.com/forex-brokers/) can tell you how much of an impact politics have on market growth.

A Colorful View Of Politics

Most people see politics and its impact on the market through a colored lens. Investors become obsessed with individuals or impressed with rhetorical skills or a unique style that makes a particular politician appear to be the best choice. Many think that certain political parties, ideas, and policies are inherently good or bad for the market. They are convinced that one party is ‘pro-business’ and the other is not.

In doing so, they ignore the fact that politicians are marketing people. They respond to emotions and spread views or agenda items to advance their political career. Their program is not necessarily what they will do — it is usually what they think will get the most votes. Many politicians, even some quite famous ones, have completely changed their minds over time. From Greek politicians who oppose austerity and suddenly rally behind cost-cutting and privatizations to US presidents returning to tax promises, history is full of examples of situations where the deed was not put to the word.

Politics And The Market

We believe that markets are not interested in people and have no demonstrable direct relation to a political party. Regardless of the political spectrum from which the government had been embodied, they are equally capable of pursuing policies that can directly affect the market.

Consider America, for example, whose return data on equities goes way back in time. In our experience, most investors believe that the Republican Party is better for stocks than the Democratic Party. But since 1926, the US S&P 500 has averaged 14.8 percent in years that a Democratic president was in power, versus 8.8 percent for a Republican. [i] This is not to say that Democrats are better for the stock market. It simply means that the common idea that there are entrepreneurial parties is a misconception.

Across Europe and globally, both the left and the right have been in power during rosy bull markets and hideous bear markets. You cannot say with certainty whether one party is better than the other for the market. Moreover, we do not have a ‘comparison group’, as scientists call it. So you cannot be sure what would have happened to the market if the opposition party or some other politician had been in power. In the Western world, business is the mainstay of economic activity — and businesses can be very flexible and resilient. It is sometimes difficult to say whether a government’s policy is helping or hindering the economy — even when it comes to aiding measures. In addition, in many large countries, the government is not one party.

Legislative risk

Markets are not led by parties and individuals, but that does not mean that politics has no influence. In the developed world, it’s mainly about legislative risk. What is the likelihood that a government, regardless of party, will pass a bill that changes property rights, which could undermine risk appetite and harm the market? Because radical legislation can foster risk aversion in the market, we think that a deadlock — politicians who disagree and cannot pass new laws — is often a good thing. It reduces the chance that they will pass extreme legislation.

Sometimes a stalemate means that opposition parties are constantly blocking the government’s policy agenda. When a government has a narrow majority — or is a minority government — it can struggle to get important legislation passed. But a stalemate can also occur in situations where parties are divided internally or in disagreements between coalition partners.

Many parties have contentious supporters who may not follow the party line. Coalitions are often marriages of convenience with few ideological interfaces. That means that not much is happening in the legislative field. Some argue that a stalemate stands in the way of required reforms — which is true in some countries. But our experience is that reform often produces winners and losers. And in more competitive economies — such as those in much of the developed world — reform is usually not really necessary. Low legislative risk limits uncertainty, which is positive for equities. When radical changes like a sword of Damocles don’t hang over stock markets, we believe that it is one less worry for investors.

What’s Political Psychology?

At its very center, political psychology is focused on a person’s behavior within the given political system. Psychology alone can’t explain intractable conflicts, war, Holocaust or even other extreme behavior of the state or collective political entity in a complex environment. Individuals are not acting or responding within a vacuum. Rather, their behavior greatly varies and responds to the differences in the following:

  • Political cultures
  • Political institution
  • Leadership style and;
  • Social norm

As a matter of fact, psychology has greatly influenced the behavior of foreign policy, mainly because of how it interacted with the specific elements of distinct societies, national governments and international system. Basically, the same logic is applied to a wider range of phenomena.

How People Generally React?

Complex mix of political context and individual psychology is shaping public reaction to terrorism. Public support for policies regarding anti-terrorism is basically dependent on the reaction of a threatened government, how they perceived the competence as well as effectiveness in fighting terrorism and, the vulnerability felt by their citizen towards future terrorist events.

External forces like the terrorist capabilities and determination and strength of government national security policy vary over time and contexts. These are all factors that are influencing how a citizen would feel and react on a given situation.

A weak government and powerful terrorist have a tendency to create anxiety amongst threatened population whereas the opposite is more likely to conjure feelings of anger. Aside from that, not everyone is responding to threat in the same manner and individual psychological disposition has added role in figuring out whether someone is reacting with anxiety or anger with terrorism.

Generally speaking, a society that is dominated by feelings of anger might support aggression towards their action for antiterrorism while a population that is dominated by anxiety might oppose aggressive decisions that may exacerbates the risks of escalating terrorism.

Using Your Own Will Against You

In a broader sense, questions regarding public reactions to terrorism or authoritarian response to a fascist rule are associated to among the biggest concerns in political psychology; how well the citizens are equipped in handling their democratic responsibilities, are they capable of deliberating over present issues to arrive at a fair decision or will they be succumbing to internecine enmities and become victim of irrational intolerance?

Many of the same procedures take place among political leaders and even at work such as in QQ online. Political psychology is used deliberately to control a person’s reaction and decision by those who are well aware of how to manipulate it.

Fund-Raising Prowess of VP Hopefuls, Did It Influence Biden’s Decision?

Will fundraising abilities be a critical aspect when Joe Biden decides on his choice of Vice Presidential running mate in the forthcoming general election in November? Apparently not as much, because reports just came in that Biden chose Senator Kamala Harris as his running mate.

Financial contributions are seen as silent indicators of real voters supporting Joe Biden’s candidacy, even if only for the purpose of ousting Trump from the Oval Office. The more funds raised by a VP hopeful, the greater the number of individuals backing the members of the electoral college who will vote for the Democratic tandem. Although Trump often boasted of the huge financial backing raised by his campaign team in his behalf, most of the funds came from big donors who in recent months have started withdrawing their financial support.

 

VP Hopefuls Who Achieved Tremendous Success in Raising Campaign Funds for Joe Biden

Joe Biden has earlier remarked that he will be choosing a governing partner and has been holding one-on-one interviews to determine the best pick. In the meantime, and with the vetting process still ongoing, the fund-raising prowess of each VP hopeful is now becoming an important consideration.

Currently, Senator Elizabthe Warren is in the lead, having raised as much as $7.7 million dollar by going along with high-dollar fund raising events that she did not engage in for her own presidential candidacy. In addition, she drew as many as 50,000 attendees to her grassroots event, while also sending emails to her and Biden’s small-dollar list of supporters. The amount is still expected to increase as Warren is scheduled to hold more fund-raising events in Biden’s name.

Sen. Kamala Harris is doing great as well. According to Politico sources , her fundraising activities on behalf of Joe Biden has already raised more than $5 million.

Senator Tammy Duckworth, who after having co-headlined three fundraisers with the Biden couple, as well as after appearing in other events, contributed more than $3 million for the Democratic campaign.

Politico also reports that Susan Rice, former President Obama’s national security adviser and also a potential VP pick, was able to raise funds by simply headlining fund raising events for Biden even without the latter in attendance.

Experts Observed That The Hong Kong Financial Market Is Surprisingly Stable

At the moment it does not look like that investors are pulling their capital out of the city in droves.

“The Hong Kong dollar has been trading on the strong side of the spectrum since April – at a rate of 7.75 Hong Kong dollars per US dollar. This means that there is a constant inflow into the city, “ — Vincent Tsui, Asia analyst at the international analysis house Gavekal Dragonomics in Hong Kong, the Handelsblatt. 

The Hong Kong dollar is pegged to the rate of the American dollar and can only range between 7.75 and 7.85 per US dollar.

When it became known at the end of May that the government in Beijing wanted to extend its powers in the Chinese Special Administrative Region significantly with a security law for Hong Kong, the Hong Kong stock exchange had plummeted and foreign companies had expressed concern according to FX brokers like igcom,

The New Security Law in HongKong

The new security law marks a turning point in the financial metropolis. In contrast to mainland China, Hong Kong has had a functioning and independent legal system to date, from which investors have also benefited. However, under the pretext of preserving national security, the new security law creates considerable possibilities for Beijing to intervene in Hong Kong. Just one week after the controversial Security Act came into force, the National Security Authority in the financial metropolis was opened.

The security bureau should oversee that the new law is being implemented by the Hong Kong government. If there were a significant outflow of capital, it would largely go to the Asian metropolis. Singapore is the obvious alternative for wealthy bank customers and investors who distrust the Hong Kong financial cente. All business related to mainland China would remain in Hong Kong.

This is the bulk of Hong Kong’s financial transactions.

“No either-or situation”

Previously, a surge in foreign currency balances in Singapore had sparked speculation that it was linked to Hong Kong’s political turmoil. Already last year, when street protests paralyzed Hong Kong, Singapore’s leadership rejected the impression that the city-state could emerge as a beneficiary of the crisis. “In Singapore, we thrive best when the region is stable and other countries we do business with are doing well,” said Prime Minister Lee Hsien Loong, referring to the situation in Hong Kong. Observers see several reasons why the Hong Kong financial market has so far been unaffected by the significant changes in the metropolis.

Predicting an end to Hong Kong’s hedge fund industry is premature. “There are currently some IPOs in the pipeline, so the demand for Hong Kong dollars is likely to increase,” says Merics expert Zenglein. Chinese institutional investors are not bothered by the National Security Act, said Zenglein.

The strong Hong Kong dollar and capital inflow to the financial metropolis could be due to the interest rate differential and the positioning of foreign investors for the upcoming major IPOs, Tsui said.

Where does Your Tax Money Go?

We are all paying taxes. But where does the federal government puts the tax money they have collected? Basically, federal government is collecting taxes in an effort to fund different public services. In fact, in the fiscal year of 2019, the federal government has spent over 4.4 trillion dollars, which amounted to 21% of the GDP of the country.

Out of that money, over 3.5 trillion dollars was financed by the federal revenue while the remaining 984 billion dollars was financed via borrowing. This includes lending people money to open a startup business and assisting them to grow it. So if you want to have better understanding of this matter, les mer om lån her.

Public Services Funded by the Government

As mentioned before, the government is funding several public services. What kinds of public services if you may ask?

Social Security

In 2019, 23% of the budget or a trillion dollars were paid for Social Security. This has provided monthly retirement benefit that’ll average at $1503 to 45 million retired workers in December of 2019. Social Security provided benefits as well to around 3 million children and spouses of retired workers, 6 million surviving spouses and children of deceased workers and 10 million disabled workers as well as their eligible dependents in last year of December.

Healthcare

The 4 health insurance programs of the country namely Children’s Health Insurance Program or CHIP, Affordable Care Act or ACA, Medicaid and Medicare have contributed 25% of the budget in 2019 or around 1.1 trillion dollars. Almost 3/5 of the amount or 651 trillion dollars all goes straight to Medicare, which provided health coverage to approximately 61 million Americans who have disabilities or over 65 years old. The rest of the amount was divided across CHIP, ACA and Medicaid. 

Under normal circumstances, CHIP and Medicaid are providing long-term care or health care to 82 million low-income parents, elderly people, people with disabilities and children more or less. Both CHIP as well as Medicaid are requiring matching payments from the state. In fact in 2019, 9.6 out of the 11.4 million people have enrolled in health insurance via the ACA marketplace collected subsidies that lower out-of-pocket costs and premiums can offer. That is an estimated cost of 56 billion dollars.

Defense and International Security Assistance

697 billion dollars or 16% of the budget have gone for security and defense related international activities. This is to maintain security and safety of Americans against threats both local and international.

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