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March 14, 2008 | Business Administration, Business Analysis, Business Management, Business News

NBC News Report

“On Tuesday, the Dow Jones Industrial Average shot up 416 points, the index’s biggest single-day gain since July 2002. The stock market responded favorably to the Fed’s decision to pump $200 billion into the financial markets to ease the credit strain create by the mortage industry crisis.”

This paragraph is typical of what many people might have read in local newspapers or on the evening news recently. But what exactly does it mean? The Dow? The Fed? And of what use is this information to you?

Well, part of your ability to be effective in the business world, even at a local level, is rooted in knowing what’s going on in the world around you. Now, it would be overly ambitious to expect veryone to read the Wall Street Journal (www.wsj.com) each morning or flip through The Economist each week. On the other hand, you should probably aspire to have at least a working knowledge of the strange economic world that spins around you.

In the spirit of understanding current events better, let’s slice the opening paragraph of this article into its component parts.

  • Dow Jones Industrial Average — Commonly referred to as “the Dow,” the DJIA is a weighted average of 30 stocks that have been chosen as representative o the U.S. Stock market as a whole. In spite of the “industrial” name, the Dow includes corporations from several industries, including such companies as 3M, American Express, General Motors, Home Depot, Intel, Microsoft and Walmart. So when you hear that the Dow has gone up or down, you’re hearing about the relative performance of a select group of companies that represent the US economy as a whole. (www.dowjones.com)
  • The Federal Reserve — The “Fed” is the central bank for the United States. It was established in 1913 by the Federal Reserve Act to address banking panics. It is run by a presidentialy-appointed Board of Governors and its duties are carried out by 12 regional Fed banks dispersed in major cities throughout the country. The scope of the Fed’s duties is quite broad, and includes control of monetary policy to positively affect employment, prices and long-term interest rates. Learn more about the Fed at www.federalreserve.gov.
  • Benjamin Bernanke — He is the current Federal Reserve chairman. A political appointee, the Fed chairman is among the most important positions in terms of influence and impact in all of government. Bernanke was preceded in his position by Alan Greenspan (1987-2006) and Pul Voclker (1979-1987).

    • Ultimately, information is only as good as it useful to you. If you can understand a few basic economic principles, keep up on the news and read the occasional blog article like this one, your customers will be impressed by your understanding of the big picture.

    [tags]dow_jones_industrial_average, wall_street_journal, industry_crisis, home_depot, walmart, economic_world, american_express, local_newspapers, economic_principles, working_knowledge, business_world[/tags]

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