Terms From The ECONOMIST

Hard Currency: A hard currency is expected to retain its value, or even benefit from APPRECIATION, against softer currencies.

Hawala: An ancient system of moving money based on trust. In Hawala, no money moves physically between locations; nowadays it is transferred by means of a telephone call or fax between dealers in different countries. No legal contracts are involved, and recipients are given only a code number or simple token, such as a low-value banknote torn in half, to prove that money is due.

Horizontal equity: One way to keep taxation fair. Horizontal equity means that people with a similar ability to pay taxes should pay the same amount.

Hot money: The money that is held in one currency but is liable to switch to another currency at a moment’s notice in search of the highest available returns, thereby causing the first currency’s exchange rate to plummet. It is often used to describe the money invested in currency markets by speculators.

Human development index: Calculated since 1990 by the United Nations Development Programme, the Human Development Index quantifies a country’s development in terms of such things as education, length of life and clean water, as well as income.

Income tax: A much-loathed method of Taxation based on earnings. It was first collected in 1797 by the Dutch Batavian Republic. In the UK it was introduced in 1799 as a “temporary” measure to finance a war against Napoleon, abolished in 1816 and reintroduced, forever, in 1842. In most countries, people do not pay it until their income exceeds a minimum threshold, and richer people pay a higher rate of income tax than poorer people.

Index numbers: Economists love to compile indices aggregating lots of individual data, so they can analyse broad trends in the behaviour of an economy. Inflation is measured by an index of consumer prices.

Inflation: Rising PRICES, across the board. Inflation means less bang for your buck, as it erodes the purchasing power of a unit of currency. Inflation usually refers to consumer prices, but it can also be applied to other prices (wholesale goods, wages, assets, and so on). It is usually expressed as an annual percentage rate of change on an index numbers.

Insider trading: Insider trading involves using INFORMATION that is not in the public domain but that will move the PRICE of a share, BOND or currency when it is made public. An insider trade takes place when someone with privileged, confidential access to that information trades to take advantage of the fact that prices will move when the news gets out.A practice that was made illegal in the United States in 1934 and in the UK in 1980, and is now banned in most countries.

Insurance: In economic terms, anything used to reduce the downside of risk. In its most familiar form, insurance is provided through a policy purchased from an insurance company. But a fuller definition would also include, say, a financial security used to hedge, as well as assistance available in the event of disaster. It could even be provided by the government, in various ways, including welfare payments to sick or poor people and legal protection from creditors in the event of bankruptcy.

Intellectual capital: The part of a country's or a firm’s capital or an individual’s human capital that consists of ideas rather than something more physical. It can often be protected through patents or other intellectual property laws.

Interest: The cost of borrowing, which compensates lenders for the RISK they take in making their money available to borrowers.

Investment: Putting money to work, in the hope of making even more money. Investment takes two main forms: direct spending on buildings, machinery and so forth, and indirect spending on financial securities, such as bonds and shares.

Invisible hand: Adam Smith’s shorthand for the ability of the free market to allocate factors of production, goods and services to their most valuable use. If everybody acts from self-interest, spurred on by the profit motive, then the economy will work more efficiently, and more productively, than it would do were economic activity directed instead by some sort of central planner.