money guidance and how to get rich_297

_{rise. The prices of newly issued bonds are fixed. But let's back up a bit.}

_{Higher interest rates mean that companies are likely to borrow less,}

_{produce less, and thus earn less. (This is because higher interest rates}

_{make it more expensive to borrow.) Since stock prices are tied to how}

_{much a company can earn, higher interest rates theoretically cause}

_{stock prices to fall. This, coupled with rising bond interest rates, makes}

_{bonds more attractive to investors.}

_{Imagine 5% bonds with 10 years left until maturity that originally sold}

_{for $1,000 each. If you buy these bonds now, you'll be getting $50 per}

_{year from each of them and then $1,000 at maturity. But, if interest rates}

_{have risen since those bonds were issued, and you can buy new 10-year}

_{bonds that pay you 10%, that amounts to $100 per year per $1,000 invested.}

_{You would obviously be willing to pay more for the 10% bonds}

_{than the 5% ones. So, the price of 5% bonds will fall. It will fall to the}

_{point where $1,000 invested in the 5% bond will bring you same total}

_{yield-to-maturity as $1,000 invested in the new 10% bond.}

_{By one common definition, you have a recession when the nation's economic}

_{output (Gross Domestic Product) declines for at least two consecutive}

_{quarters. Recessions are often accompanied by rising unemployment}

_{and decreasing consumer spending. To answer the question}

_{of what causes them, I thought I'd see what an online search engine}

_{would offer me when I typed in "cause recession." Here are just some}

_{of the many articles and Web pages it returned:}

_{• Y2K may cause global recession…}

_{• Fed mistake could cause recession…}

_{• Increase in oil prices can cause recession…}

_{• Stock market fall unlikely to cause recession…}

_{• Analysts say stock sell-off may cool the economy and cause recession…}

_{• Households saving more will cause recession…}

_{• Overspending and high taxes could cause recession…}

_{• Hard brushing can cause gum recession…}

_{Hmm… well, that last item appears to be dental and not economic in}

_{nature... but, otherwise, the tidbits above should demonstrate that a}

_{wide variety of things are often linked to recessions. Causes might}

_{be internal (e.g., interest rate changes) or external (e.g., wars, financial}

_{crises elsewhere in the world, etc.). Economists vary on their views}

_{of what causes recessions. At any given time, you'll likely find some}

_{people who think we're heading toward a recession and some people}

_{who think we're moving away from one.}