The Basic Principles of Inflation and Deflation

In an economy like the United Kingdom, inflation is a very worrying term. Worrying, because this means that all the money a person saved in a bank is gradually decreasing in value. Add to this the decreasing interest rates to help grow the different sectors of the UK industry, and you have yourself some big trouble.

However, both inflation and deflation have something to do with the maintenance of the UK economy. 

Inflation increases the value and price of things while lowering the power of the sterling. Deflation is increasing the power of the sterling, but decreasing the development and growth of business, infrastructures and others.

The United Kingdom has the UK Treasury, which oversees the printing and production of currencies circulating in the United Kingdom. The UK Sterling is a fiat currency in itself.

A fiat currency is one where the government and other parties have very slight influence over the frequency the UK Treasury produces currencies. The Treasury must ensure that the currencies circulating in the country are not inducing any inflation or deflation.

In reality, the Treasury’s goal is to find the “sweet spot” that would enable good economic growth while retaining the power of the sterling in the UK. In this way the economy can flourish while its citizens are encouraged to spend just enough from their personal savings accounts.

The Pros and Cons of Britain’s Leaving of the EU

Under much pressure from his Conservative party members, British Prime Minister David Cameron may invoke a British Exit or “Brexit” from the European Union by invoking Article 50, a Departure Clause, in the EU. However, the EU is the UK’s biggest single export market, but the return of judicial power to Westminster is assured by the UK’s re-completion of sovereignty.

Pros

Should the UK leave the Euro, UK helps itself avoid the EU’s “undemocratic” methods criticised by many political experts. EU directives, which helps make the EU unaccountable should anything happen to the United Kingdom, supersede most of the UK’s laws. The UK will also enjoy further economic improvements because it will not be bound to bail out other European countries during economic recessions.

Cons

The EU is the UK’s biggest single export market, and the UK wants to exit the EU while ensuring this single market is still open despite the disconnect. The EU also imports a great deal from different European nations. Large tariffs on European imports and trade deficits with the EU can also materialize.  According to observers, the UK’s annual deficit of £50 billion can be secured, but it can lose its trade surplus of £12 billion.

Like in all deals, there’s a trade-off. Let’s hope our politicians do what is necessary to help the country.

Franchising for 2014? Yes or No?

I’ve had some people ask me about the feasibility of franchising for an investment in the upcoming year. This 2013 had played its toll on the European economy. The Euro zone crisis took the most highlight with the property bubble bursting and the currency’s value dropping. Everyone has smaller capital to start with. So is franchising a feasible solution? 

1.    Franchiser’s Health

Many strong fastfood and restaurant chains still remain strong especially in the corporate areas of many countries. However, those that gain greater recognition from consumers are the ones that present something unique, and most of these are small businesses. Now small businesses are likely higher risk investments, but they’re innovative. If you haven’t taken a risk with your investment for quite a while, asking the small business for franchising could open up great opportunities.

2.    Franchise Fees

The only downside to franchising is that you will really have to pay higher franchise fees. Resources, establishment and training fees are rising because of competitiveness and a proprietor will need to scrounge up some high capital. As for returns, refer to number one.

3.    Attractiveness

Still, the kind of company you work with will be the basis of your business’ attractiveness to audiences. Targeting children with kid-themed fastfood could work when you are established in nearby schools or supermalls. However, stay away from standard franchises, such as McDonalds or KFC; they are not as attractive as they once were and more people are leaning to either extreme dishes (giant burgers or fries) or fusion and specialty dishes.