As expected, the Federal Open Market Committee has embarked on another round of planned asset purchases. In its November 3 policy statement, the FOMC wrote that it expects to buy another $600 billion in long-term Treasuries by the end of 2Q11 ($75 billion per month), in addition to the $35 billion per month in reinvested principal payments from its portfolio of mortgage-backed securities. There has been much criticism of the move in the financial press. Certainly, there are risks in the Fed’s strategy. However, it’s hardly reckless or ill-advised.
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress – nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren’t helping.
Trekking markets & more with InvestrekkInves Trekk
The report presents a summary of the Indian market activity during the week ended 27 June 2021. It also provides some important insights about the global market trends and Indian Market outlook for the Week beginning 28 June 2021.
As expected, the Federal Open Market Committee has embarked on another round of planned asset purchases. In its November 3 policy statement, the FOMC wrote that it expects to buy another $600 billion in long-term Treasuries by the end of 2Q11 ($75 billion per month), in addition to the $35 billion per month in reinvested principal payments from its portfolio of mortgage-backed securities. There has been much criticism of the move in the financial press. Certainly, there are risks in the Fed’s strategy. However, it’s hardly reckless or ill-advised.
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress – nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren’t helping.
Trekking markets & more with InvestrekkInves Trekk
The report presents a summary of the Indian market activity during the week ended 27 June 2021. It also provides some important insights about the global market trends and Indian Market outlook for the Week beginning 28 June 2021.
07 August 2013--Understanding the Fed's Latest MovesEconReport
The Federal Reserve Chairman, Ben Bernanke, made some statements on 19 June 2013 that sent shockwaves
throughout the financial markets in the United States and Asia. There is no change in policy. This, Chairman Bernanke,
emphatically stated several times at the 19 June 2013 press conference. So why did the markets react the way they did?
This analysis will assist in understanding why the markets responded in the manner that they did to Chairman Bernanke's
suggestion that the asset-purchasing program will “taper off” in late 2013 or in mid- to late-2014 although this possibility
is clearly stated in the Federal Reserve's Open Market Committee's (FOMC's) 22 May 2013 statement.
Obligatory relationship between the deficit and interest ratesALTAX Consulting
According to analysis of the statistical data from Bank of Albania (BoA) reports and bulletins regarding to the aggregate M1 and M2, the support of the core idea of this comment is due to efforts by the Bank of Albania to stabilize interest rates. This leads the system to respond to deficits by buying Government securities and/or taking other actions that result in increases in the money supply.
• Infrastructure—the other big fix
• What is the stock market saying about earnings?
• As short-term markets thaw, bond investors focus on long-term risk
• Hedge funds suffer their worst month ever
• Does a $1 trillion deficit matter?
• Q&A: Sizing up Obama’s policies and politics
World Currencies
Currently most—if not all—currencies are directly pegged to the US dollar with the
governance of a monetary standard. The variance in the effects of inflationary pressure—when
compared to the US dollar—is due to their value (purchasing power) and their central banks'
monetary policies. Today we have reports concerning the rise in value of various currencies
when compared to the US dollar. For the most part, this is due to the US dollar's rate of descent
due to its central bank's failure to raise the Fed Fund rate which would give some balance to its
devilish inflationary monetary policy.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Agcapita July 2013 - Central Banking's Scylla and CharybdisVeripath Partners
While I believe that eliminating QE is the right thing to do for the long-term health of the economy, the recent equity and bond market declines are but modest harbingers of the unintended short-term consequences that the Fed’s prolonged ZIRP/QE program and its termination will wreak – rollover and convexity risk. These are the proverbial pigeons that will come home to roost if the US Federal Reserve stops its massive bond-buying spree and rates normalize.
US Fed rate hike in September 2015: Who will be the top 4 winners and losers?Aranca
The much hyped US Fed rate hike likely to be in September 2015 will mark the end of an era of free money. While it brings the good news that the most powerful economy of the world is back on track and can sustain a rate hike, there may be certain repercussions for the global markets. Here’s our take on who may win, and who may lose.
If U.S. politics do not derail the recovery, pent-up demand can drive faster economic growth. Fixed-income outflows appear likely to continue, pushing rates higher.
What recent and past actions have Canada and the US taken to counter.pdfmeejuhaszjasmynspe52
What recent and past actions have Canada and the US taken to counteract their exchange rates
with the economy in such distress over the past 10 years?
Solution
Since 2007, the world has experienced a period of severe financial stress, not seen since the time
of the Great Depression. This crisis started with the collapse of the subprime residential
mortgage market in the United States and spread to the rest of the world through exposure to
U.S. real estate assets, often in the form of complex financial derivatives, and a collapse in global
trade. Many countries were significantly affected by these adverse shocks, causing systemic
banking crises in a number of countries, despite extraordinary policy interventions. Systemic
banking crises are disruptive events not only to financial systems but to the economy as a whole.
Such crises are not specific to the recent past or specific countries – almost no country has
avoided the experience and some have had multiple banking crises. While the banking crises of
the past have differed in terms of underlying causes, triggers, and economic impact, they share
many commonalities. Banking crises are often preceded by prolonged periods of high credit
growth and are often associated with large imbalances in the balance sheets of the private sector,
such as maturity mismatches or exchange rate risk, that ultimately translate into credit risk for
the banking sector.
Crisis management starts with the containment of liquidity pressures through liquidity support,
guarantees on bank liabilities, deposit freezes, or bank holidays. This containment phase is
followed by a resolution phase during which typically a broad range of measures (such as capital
injections, asset purchases, and guarantees) are taken to restructure banks and reignite economic
growth. It is intrinsically difficult to compare the success of crisis resolution policies given
differences across countries and time in the size of the initial shock to the financial system, the
size of the financial system, the quality of institutions, and the intensity and scope of policy
interventions. With this caveat we now compare policy responses during the recent crisis episode
with those of the past. The policy responses during the 2007-2009 crises episodes were broadly
similar to those used in the past. First, liquidity pressures were contained through liquidity
support and guarantees on bank liabilities. Like the crises of the past, during which bank
holidays and deposit freezes have rarely been used as containment policies, we have no records
of the use of bank holidays during the recent wave of crises, while a deposit freeze was used only
in the case of Latvia for deposits in Parex Bank. On the resolution side, a wide array of
instruments was used this time, including asset purchases, asset guarantees, and equity injections.
All these measures have been used in the past, but this time around they seem to have been put in
place quicker (for detailed informatio.
07 August 2013--Understanding the Fed's Latest MovesEconReport
The Federal Reserve Chairman, Ben Bernanke, made some statements on 19 June 2013 that sent shockwaves
throughout the financial markets in the United States and Asia. There is no change in policy. This, Chairman Bernanke,
emphatically stated several times at the 19 June 2013 press conference. So why did the markets react the way they did?
This analysis will assist in understanding why the markets responded in the manner that they did to Chairman Bernanke's
suggestion that the asset-purchasing program will “taper off” in late 2013 or in mid- to late-2014 although this possibility
is clearly stated in the Federal Reserve's Open Market Committee's (FOMC's) 22 May 2013 statement.
Obligatory relationship between the deficit and interest ratesALTAX Consulting
According to analysis of the statistical data from Bank of Albania (BoA) reports and bulletins regarding to the aggregate M1 and M2, the support of the core idea of this comment is due to efforts by the Bank of Albania to stabilize interest rates. This leads the system to respond to deficits by buying Government securities and/or taking other actions that result in increases in the money supply.
• Infrastructure—the other big fix
• What is the stock market saying about earnings?
• As short-term markets thaw, bond investors focus on long-term risk
• Hedge funds suffer their worst month ever
• Does a $1 trillion deficit matter?
• Q&A: Sizing up Obama’s policies and politics
World Currencies
Currently most—if not all—currencies are directly pegged to the US dollar with the
governance of a monetary standard. The variance in the effects of inflationary pressure—when
compared to the US dollar—is due to their value (purchasing power) and their central banks'
monetary policies. Today we have reports concerning the rise in value of various currencies
when compared to the US dollar. For the most part, this is due to the US dollar's rate of descent
due to its central bank's failure to raise the Fed Fund rate which would give some balance to its
devilish inflationary monetary policy.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Agcapita July 2013 - Central Banking's Scylla and CharybdisVeripath Partners
While I believe that eliminating QE is the right thing to do for the long-term health of the economy, the recent equity and bond market declines are but modest harbingers of the unintended short-term consequences that the Fed’s prolonged ZIRP/QE program and its termination will wreak – rollover and convexity risk. These are the proverbial pigeons that will come home to roost if the US Federal Reserve stops its massive bond-buying spree and rates normalize.
US Fed rate hike in September 2015: Who will be the top 4 winners and losers?Aranca
The much hyped US Fed rate hike likely to be in September 2015 will mark the end of an era of free money. While it brings the good news that the most powerful economy of the world is back on track and can sustain a rate hike, there may be certain repercussions for the global markets. Here’s our take on who may win, and who may lose.
If U.S. politics do not derail the recovery, pent-up demand can drive faster economic growth. Fixed-income outflows appear likely to continue, pushing rates higher.
What recent and past actions have Canada and the US taken to counter.pdfmeejuhaszjasmynspe52
What recent and past actions have Canada and the US taken to counteract their exchange rates
with the economy in such distress over the past 10 years?
Solution
Since 2007, the world has experienced a period of severe financial stress, not seen since the time
of the Great Depression. This crisis started with the collapse of the subprime residential
mortgage market in the United States and spread to the rest of the world through exposure to
U.S. real estate assets, often in the form of complex financial derivatives, and a collapse in global
trade. Many countries were significantly affected by these adverse shocks, causing systemic
banking crises in a number of countries, despite extraordinary policy interventions. Systemic
banking crises are disruptive events not only to financial systems but to the economy as a whole.
Such crises are not specific to the recent past or specific countries – almost no country has
avoided the experience and some have had multiple banking crises. While the banking crises of
the past have differed in terms of underlying causes, triggers, and economic impact, they share
many commonalities. Banking crises are often preceded by prolonged periods of high credit
growth and are often associated with large imbalances in the balance sheets of the private sector,
such as maturity mismatches or exchange rate risk, that ultimately translate into credit risk for
the banking sector.
Crisis management starts with the containment of liquidity pressures through liquidity support,
guarantees on bank liabilities, deposit freezes, or bank holidays. This containment phase is
followed by a resolution phase during which typically a broad range of measures (such as capital
injections, asset purchases, and guarantees) are taken to restructure banks and reignite economic
growth. It is intrinsically difficult to compare the success of crisis resolution policies given
differences across countries and time in the size of the initial shock to the financial system, the
size of the financial system, the quality of institutions, and the intensity and scope of policy
interventions. With this caveat we now compare policy responses during the recent crisis episode
with those of the past. The policy responses during the 2007-2009 crises episodes were broadly
similar to those used in the past. First, liquidity pressures were contained through liquidity
support and guarantees on bank liabilities. Like the crises of the past, during which bank
holidays and deposit freezes have rarely been used as containment policies, we have no records
of the use of bank holidays during the recent wave of crises, while a deposit freeze was used only
in the case of Latvia for deposits in Parex Bank. On the resolution side, a wide array of
instruments was used this time, including asset purchases, asset guarantees, and equity injections.
All these measures have been used in the past, but this time around they seem to have been put in
place quicker (for detailed informatio.
AnsA) When financial markets stood on the verge of collapse in th.pdfsutharbharat59
Ans:
A) When financial markets stood on the verge of collapse in the summer of 2008, two of the
worlds most important central banks, the US Federal Reserve and the Bank of England, began
considering unorthodox policy measures. They turned to Quantitative Easing, or QE: injecting
money into the economy by purchasing assets from the private sector, in the hope of boosting
spending and staving off the threat of deflation. These were desperate measures for desperate
times.
With signs of a fragile economic recovery gathering enough momentum to reassure
policymakers in the US, the policy was expected to be wound down. But in a move that caught
commentators off guard, the Fed instead committed to continue with its existing level of asset
purchases. For the foreseeable future, at least, QE is here to stay. What began as a short-term
crisis measure has now become a key component of Anglo-American growth strategies. Its
important, then, to take stock of QE and the central role it has played within the Anglo-American
response to the financial crisis.
The way the Fed led the policy response to the financial crisis is important in two ways. First, it
reflects the extent to which the Anglo-American economies have become financialised: credit-
debt relations are pervasive throughout all facets of contemporary economic activity and there
has been a deepening, extension and deregulation of financial markets commensurate with this
development. In that context, with the increased competitiveness, scale and global integration of
financial markets intensifying the risk of financial instability, the crisis management capacities of
central banks have become increasingly important.
Second, central bank leadership of the policy response also reflects a key feature of neoliberal
political economy in practice. Despite all the rhetoric of free markets, competition and
deregulation that has been the mainstay of neoliberalism, there is a central contradiction at its
heart: neoliberalism has been extremely reliant upon the active interventions of central banks
within supposedly free markets.
The crisis has been warehoused on the expanding balance sheets of central banks, demonstrating
just how much scope for policy manoeuvre there is when governing elites want it. Government
debt and private assets, including toxic mortgage-backed securities, have been indefinitely
transferred onto central bank accounts. This strategy highlights the role of arbitrary accounting
processes, shaped by state institutions, at the heart of supposedly free market economies.
Given this room for manoeuvre, there is no doubt that a much more expansionary fiscal policy
and a progressive taxation system could have been implemented in response to the crisis, but that
response is foreclosed by the ideological confines of the prevailing neoliberal orthodoxy. Instead,
we have monetary expansion and fiscal austerity.
Incubated within the crisis conditions of the 1970s, the neoliberal revolution in the West.
Student Name:________________
1. Article Title, Author, Date and Source:
Transmission Unaccomplished, John Authers September 24
th
2010 Financial Times Page 12
2. Article Summary:
“Transmission Unaccomplished” written in the Lex section of Friday’s Financial Times
offers an interesting and simplified perspective of the complex and sophisticated purpose and
workings of monetary policy. At a time when the world is reeling from the effects of
misunderstood monetary policy in the United States and other nations around the globe, this
article clearly cuts to the heart of the matter, provides a simple, easy to understand analogy
relating monetary policy to an automobile. The authors describe the key moving parts of the
economy as they correlate to their counterparts in an automobile. While he labor and
resources constitute the fuel of the economy, technology and institutions correspond to the
engine, and commerce is depicted as wheels. The financial system is the transmission,
responsible for moving the power and energy created by the fuel and engine to the wheels.
This simple analogy helps frame the context for the reason why central bankers – the
transmission mechanics – were facing increasing difficulty. In particular, the 1.6 % drop in
the dollar’s value, the lack of real economic turn-around, and the lagging increase in GDPs
around the world. The authors seem to think the US, despite an increasing saving rate and
10% deleveraging, still has long ways to go on the road to recovery, and the automobile
analogy suggests, is in need of significant repairs and rebuilding before it is truly road worthy.
3. How is the article is related to the readings and class discussions?
The concepts in the article mesh with the readings in chapters 3 – 5 as a current, real world
depiction of how monetary policy influences decisions in economics. The article highlights the
need for central bankers to properly manage monetary policy in order to maintain the
transmission of the vehicle, and keep the proper amount of power moving from the motor to the
wheels. It questions the true value of quantitative easing, and highlights the ramifications of
pursuing excessive QE as a policy. Just as was discussed in the first five chapters of the text
book, monetary policy involves a delicate balance of adjusting interest rates, setting currency
value, and establishing guidelines that enable prosperity and growth. The article also identifies
too much intervention as a possible means for enhancing the problems we face, rather than
ameliorating the problems.
4. What did I learn from this article?
This article certainly helped put monetary policy, something I seem to be familiar with only
through studying politics and economics, into a very concise, easy to understand framework that
enables a deeper understanding of greater associated issues. I learned that the US liabilities are
Student .
Base on the article answer 2 According to Austrian schoo.pdfadvanibagco
Base on the article, answer:
2. According to Austrian school, what should be our guiding policy for economic crisis mentioned
in the article?
3. What kind of economic policy is our government pursuing to deal with this crisis? What would
the author of this article recommend?
PLEASE WRITE A MINIMUM OF SIX LINES FOR EACH ANSWER.
The article:
In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy
was as strong as Ive seen it in my business career. Our financial institutions are strong, he added
in March 2008. Our investment banks are strong. Our banks are strong. Theyre going to be strong
for many, many years. Federal Reserve chairman Ben Bernanke said in May 2007, We do not
expect significant spillovers from the subprime market to the rest of the economy or to the financial
system. In August 2008, Paulson and Bernanke assured the country that other than perhaps $25
billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound.
Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation,
the whole thing would collapse. In the wake of this change of heart on the part of our leaders,
Americans found themselves bombarded with a predictable and relentless refrain: the free market
economy has failed. The alleged remedies were equally predictable: more regulation, more
government intervention, more spending, more money creation, and more debt. To add insult to
injury, the very people who had been responsible for the policies that created the mess were
posing as the wise public servants who would show us the way out. And following a now-familiar
pattern, government failure would not only be blamed on anyone and everyone but the
government itself, but it would also be used to justify additional grants of government power. The
truth of the matter is that intervention in the market, rather than the market economy itself, was the
driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the
central banks intervention into the economy gives rise to the boom-bust cycle, making us feel
prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayeks
theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the
quacks who blame the market for problems caused by the manipulation of money and credit. The
artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end in a
crisis and a slump, andworse than the slump itself may be the public delusion that the slump has
been caused, not by the previous inflation, but by the inherent defects of capitalism. Although my
recently released book, Meltdown explains the process in more detail, an abbreviated version of
Austrian business cycle theory might run as follows: Government-established central banks can
artificially lower interest rates by increasing the supply of money (and thus the funds banks have
a.
Base on the article answer 1 Explain F A Hayeks theory of.pdfadvanibagco
Base on the article answer:
1. Explain F A Hayek's theory of the "Business Cycle".
PLEASE WRITE A MINIMUM OF SIX LINES FOR EACH ANSWER.
The article:
In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy
was as strong as Ive seen it in my business career. Our financial institutions are strong, he added
in March 2008. Our investment banks are strong. Our banks are strong. Theyre going to be strong
for many, many years. Federal Reserve chairman Ben Bernanke said in May 2007, We do not
expect significant spillovers from the subprime market to the rest of the economy or to the financial
system. In August 2008, Paulson and Bernanke assured the country that other than perhaps $25
billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound.
Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation,
the whole thing would collapse. In the wake of this change of heart on the part of our leaders,
Americans found themselves bombarded with a predictable and relentless refrain: the free market
economy has failed. The alleged remedies were equally predictable: more regulation, more
government intervention, more spending, more money creation, and more debt. To add insult to
injury, the very people who had been responsible for the policies that created the mess were
posing as the wise public servants who would show us the way out. And following a now-familiar
pattern, government failure would not only be blamed on anyone and everyone but the
government itself, but it would also be used to justify additional grants of government power. The
truth of the matter is that intervention in the market, rather than the market economy itself, was the
driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the
central banks intervention into the economy gives rise to the boom-bust cycle, making us feel
prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayeks
theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the
quacks who blame the market for problems caused by the manipulation of money and credit. The
artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end in a
crisis and a slump, andworse than the slump itself may be the public delusion that the slump has
been caused, not by the previous inflation, but by the inherent defects of capitalism. Although my
recently released book, Meltdown explains the process in more detail, an abbreviated version of
Austrian business cycle theory might run as follows: Government-established central banks can
artificially lower interest rates by increasing the supply of money (and thus the funds banks have
available to lend) through the banking system. This is supposed to stimulate the economy. What it
actually does is mislead investors into embarking on an investment boom that the artificially lo.
31 August 2011--US Banking Sector Report 2011EconReport
The US dollar is falling in value as its debts increase, expenditures increase, and the
Federal Reserve so-called Quantitative Easing (QE) experiments only prove to further punish the
survivors of the so-called World Financial Crisis/Credit Crunch with the inability to preserve and
grow hard-won capital. The main cause of the dollars decline is the “blatant disrespect” of the
natural inverse relationship between the value and the interest-rate of bonds—which is a debt
issue—as all fiat bills are. Inflation began on 25 March 2009 when the US central bank decided
to “buy” at least US $100B worth of Treasury bonds.
Question 1Response 1Development inside and out effects t.docxaudeleypearl
Question 1:
Response 1:
Development inside and out effects the entire country's economy. It impacts the managing body, regardless the clearly irrelevant subtleties in the average person's dependably life. Both a conditions and clear deferred results of how the economy is getting along, swelling has the two its fans and spoilers. Distinctive envisions that particular degrees of swelling are helpful for a prospering economy, yet that progressively critical rates raise concerns. It can degrade the money basically and, at logically lamentable, has been a key part to subsidences.
Swelling, as referenced, is the rate a worth ascensions, and fundamentally how much the dollar is worth at a given moment concerning checking. The idea behind swelling being an impact for good in the economy is that a reasonable enough rate can nudge financial movement without debasing the money so much that it ends up being basically vain (Kohn, 2006).
Swelling can in like manner falter from asset for asset. Subordinate upon the season, the expense of gas could go up independently from with everything considered headway as it routinely does as summer moves close. In reality, there is even a term - focus improvement - for swelling that parts in everything except for sustenance and imperativeness (gas and oil), as these regions have separate factors that add to them. There are a wide degree of sorts of swelling, subordinate upon what remarkable is being viewed comparatively as what the development rate truly is by all accounts. For example, what happens if the swelling rate is well over the Fed's normal goal? At a higher rate, yet still in the single digits, that is known as walking swelling. It is seen as concerning yet sensible (Ball, 2006).
Swelling is generally depicted reliant on its rate and causes. By and large, Inflation happens in an economy when vitality for thing and experiences outmaneuvers the supply of yield. in this manner, clarifications behind Inflation have different sides, the intrigue side and supply side. The widely inclusive activity of hazard premiums in driving enlargement pay over the scope of advancing years is dependable with secured budgetary improvement and inside and out oblige cash related procedure events in the moved economies. The degree for further fitting budgetary enabling seen with money related stars seems to have declined amidst the enough low advance charges and gigantic monetary records of national banks (Bodie, 2016).
In relentless time, the correspondence of perils has wound up being constantly phenomenal, the general point of view has lit up, and money related conditions have engaged on net. With the work superstar proceeding to reinforce, and GDP improvement expected to keep up a vital good ways from back in the consequent quarter, it likely will be fitting soon to change the affiliation supports rate. Likewise, if the economy propels as shown by the SEP concentrate way, the affiliation supports rate will probably app ...
But resolving this legacy issue with continued application of past interventionist instruments does not incentivize the much needed structural reforms and private capital market activities. Financial repression has induced a re-allocation of capital across markets and greatly enhanced the role of public markets at the detriment of private market activities. Artificially low – or in some cases even negative – interest rates break the credit intermediation channel which can crowd out viable private investors.
Investment products vary in risk, return and duration. So do investor objectives. Successfully matching financial instruments with financial plans takes skill, know how and ability.
Moneycation april 2015 newsletter; volume #3, issue #9A.W. Berry
Investing is a life-long process. People invest in themselves, in their careers and in other things. Financially speaking, investing in financial instruments helps prepare people for the future whether it be for retirement, a home or additional investments. Knowing what to invest in at different stages of life is a part of that process.
Moneycation may 2015 newsletter; volume #3, issue #11A.W. Berry
Knowing about trading platforms and how they work is a key aspect of self-guided investing. The mechanics of trading financial instruments requires accuracy and precision. If transactions are not carried out flawlessly and in a timely manner via the best networks available, traders and investors face significant disadvantages.
Moneycation april 2015 newsletter; volume #3, issue #10A.W. Berry
Technical investment analysis involves understanding price movements and knowing how to interpret their meaning. Numerous technical trading tools exist to assist with improving the probability of trading success.
Moneycation march 2015 newsletter; volume #3, issue #7A.W. Berry
Investment analysis is an art and a science. It is an art in the sense that agility and dynamic fluid thinking are useful when making decisions using empirically derived data. Fundamental analysis is one such method that is not pure science, but uses mathematical techniques to ascertain key financial information such as solvency, risk, liquidity, profit margin, expected rate of return and so on.
The cost of education has increased at a faster rate than average consumer costs over the last decade. These rising expenses and a changing economic environment make planning for education all the more important. The discussion in this newsletter covers important topics surrounding managing education costs.
Stocks are considered among many investors as fundamental for return-on-investment. This is especially the case over the long run, where average returns surpass those of bonds. Investing in the stock market is not as easy as it may seem and often involves an elaborate understanding of business, market and economic influences in order to be financially successful.
The more complex an estate is in terms of asset diversification, management expectations and distribution objectives, the more pertinent a carefully crafted living trust becomes in terms of its overall financial benefit and functionality. living trusts are useful for high net worth individuals or estates that are seeking to supplement their wills with more specific asset management criteria.
Bonds are a fixed income asset that provide investors with a range of risks and yields. Numerous types of bonds and bond financial instruments exist for investors to choose from. They are often considered a safe-haven asset during times of economic contraction because they and in some cases, provide tax protection.
Cash and treasury solutions provide money related alternatives to businesses seeking greater access to capital, lower cost of debt and efficient internal financial operations; they are a part of the formula that determines how well run a business is. As businesses develop, simplified internal policies do not necessarily benefit investors as much as elaborate, sophisticated and fluid financial decision making allows for. Additionally, corporate finance tends to get more complicated as companies become larger. This is because expanded operations require greater financial management.
Consumer protections exist to prevent fraud, usury, extortion and other financial crimes. Since individuals are not always aware of commercial and legal details surrounding transactions and business communications, undesirable and underhanded access to the wallets and bank accounts of unsuspecting people becomes possible.
Transportation is often a necessity, but does not have to be the third largest piece of American' budgets. Improving personal financial planning and business financial management ideally takes as many transportation factors and scenarios in to account, and then adjusts them accordingly. This involves a close look at driving habits, equipment, travel routes and modes of transport.
Numerous financial instruments and products are used in financial planning. Life insurance is an example of both because it assists individuals accomplish financial goals via a financial mechanism that is legally structured differently from other financial planning products such as 401(k)s and individual retirement accounts.
S corporations are legally structured in a way that allow them to go untaxed. This is because income that is recognized by owners is taxed at the personal level and not via the business. Moreover, an S corporation is a pass-through or flow-through entity, which means income passes through to the shareholders. This newsletter details tax management information and methods used by and relevant to S corporations.
Financial advantages of business structuresA.W. Berry
Business structuring, whether it be a specific type of incorporation, adherence to a financial model or both, has significant effects on business' present and future financial standing, credibility and capacity. This makes structural decisions an important factor in the steering of businesses toward their intended functions and purpose.
Behavioral finance, heuristics and marketing A.W. Berry
Economic and financial heuristics explain how people's money related decision making is influenced by psychology and sociological trends. This is relevant in the marketing profession and to corporate strategists because purchase decisions, stock market investing and other financial decision making is linked to consumer behavior.
Stock options allow more ways to earn money as well as more ways to lose money. They are elaborate financial instruments that often leave beginner and novice investors scratching their heads when something goes wrong.
Planning for healthcare needs via Medicare is also not a quick task. Understanding the length of time involved when considering which insurance is right reduces unrealistic expectations and disappointment. It also helps to understand what Medicare is and who it benefits before getting in to the finer details.
Problems with Generally Accepted Accounting PrinciplesA.W. Berry
Industry diversity and vast differences between corporate financial strategies make standardizing accounting difficult. The complexity and fluidity of financial markets, asset securitization and accounting cast a certain shadow over the effectiveness of generally accepted accounting principles. GAAP are faced with numerous regulatory obstacles such as the intended goal of merging with international financial reporting standards, complications in asset valuation and exploitation of accounting practices that allow corporations considerable leeway and latitude.
The importance of investment methodologyA.W. Berry
Informed and wise investing decisions do not typically seek to dazzle or outperform, but rather pursue and attain a calculated financial objective. This newsletter seeks to apply the tenets of investment wisdom in to a review and evaluation of investment process and methodology.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
The Evolution of Non-Banking Financial Companies (NBFCs) in India: Challenges...beulahfernandes8
Role in Financial System
NBFCs are critical in bridging the financial inclusion gap.
They provide specialized financial services that cater to segments often neglected by traditional banks.
Economic Impact
NBFCs contribute significantly to India's GDP.
They support sectors like micro, small, and medium enterprises (MSMEs), housing finance, and personal loans.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdf
Monetary policy and Main Street
1. Published by Moneycation™
Newsletter: December 2013
Monetary policy and Main Street
It is no secret Federal Reserve monetary policy has
passed over long-term economic stability for a shortterm economic fix originally intended to kickstart Main
Street's economy. Central bank officials reason that by stimulating Main Street via Wall Street, the
economy is better off in the long run. However, if using metrics such as wage growth, job creation,
labor participation and corporate revenues as a percent of global market share, then monetary
policy seems less sure footed and more swaggered.
The central bank claims it has been seeking to maintain its dual mandate of inflation control and
employment, but has contributed to the devaluation of the dollar, which is just as bad as price
inflation and with little job creation success.
Econometric equations, no matter how elaborate and sophisticated, are just as capable of weaving
fabricated quantitative justification for an elitist economic status quo as statistical samples and
political rhetoric are riddled with fallacy. The fact of the matter is economics is not science,
therefore no amount of mathematical reasoning is completely accurate in terms of determining how
a particular policy affects a whole economy's performance. Investment banker Jeremy Grantham
put it this way in GMO LLCs quarterly letter:
“Economics is a very soft science but it has delusions of hardness or what has been
called physics envy. One of my few economic heroes, Kenneth Boulding, said that while
mathematics had indeed introduced rigor into economics, it unfortunately also brought
mortis.”
To be fair, at least the wealthy are getting richer, which is slightly better than no one getting
wealthier. In effect, loose monetary policy has been a windfall for Wall Street, but not necessarily
Main Street. Even a Stockhouse interview with ex-fed official Andrew Huszar admit to this in the
following quote
“While there had been only trivial relief for Main Street, the U.S. central bank's bond
purchases had been an absolute coup for Wall Street. The banks hadn't just benefited
from the lower cost of making loans. They'd also enjoyed huge capital gains on the
rising values of their securities holdings and fat commissions from brokering most of
the Fed's QE transactions. Wall Street had experienced its most profitable year ever in
2009, and 2010 was starting off in much the same way.”
2. Huszar goes on to say the monetary steroids applied via mass asset purchases and quantitative
easing lowered the incentive and pressure for Congress. Thus, the economic problems that caused
the Great Recession have not actually been dealt with despite the Dodd Frank Act, regulator
lawsuits and more pressure on financial institutions to maintain and raise capital reserve
requirements.
“As for the rest of America, good luck. Because QE was relentlessly pumping money
into the financial markets during the past five years, it killed the urgency for
Washington to confront a real crisis: that of a structurally unsound U.S. economy.”
With hundreds of billions of dollars being pumped into the U.S. economy by the Federal Reserve
Bank, one might think monetary policy's capacity to stimulate the economy would be massive.
After all, the federal slowdown of October 2013 only cost a fraction of the Fed's quantitative
easing program, yet its effects were far reaching. Moreover, according to Standard & Poor's rating
agency, the federal government partial shutdown that began in late September 2013 removed $24
billion from the economy and .06% of gross domestic product in the fourth fiscal quarter. Yet, the
Federal Reserve Bank's “quantitative easing” also known as U.S. debt monetization has been
creating $85 billion per month to purchase U.S. Treasury debt and mortgage backed securities.
Another fear is that monetary policy is becoming increasingly ineffective for Main Street. This is
evident in the chart below where GDP rose for decades while household income remained flat.
Now it seems that monetary policy can't even grow the GDP as GDP per capita has not surpassed
its peak in 2007. In other words, despite trillions of dollars of stimulus and near zero percent
interest rates, household income has continued to decline and GDP per capita has remained flat for
seven years.
U.S. gross domestic product vs. median household income
Image license: US-PD
3. Congressional testimony
On November 14, 2013, The Federal Reserve Chair nominee Janet Yellen answered questions
about the impact of monetary policy on Main St. and one of her answers is that the broad focus of
policy is to generally benefit all Americans through a “ripple effect” rather than a “trickle down
effect”. She also stated that current policy has to make use of alternatives due to a lack of scope in
traditional approaches to economic regulation. Her testimony to Congress did not seem inspiring or
encouraging due to a lack of detailed examples of just how a macro-focused policy benefits a wide
swathe of individual Americans.
In other words, just because there is a wealth effect doesn't really mean the ripples through Main
St. could not be waves. Yellen herself stated low rates do harm savers who are not necessarily
home or stock owners. In addition, according to Senator Schumer (D-NY), middle-class incomes
are declining, which doesn't point to a very effective monetary policy indeed. It seems quite
possible the Federal Reserve Bank has an agenda other than lowering unemployment and keeping
inflation in check. Summary points of the testimony are below:
• Accounting Standards: Effects of changes
• FSOC metric: Transparency for non-bank institutions
• One size fits all policy for smaller financial institutions too onerous
• P/E ratios don't suggest bubble; Equity Risk Premium doesn't indicate bubble
• Volcker rule: Maintain integrity of investor protection “firewall”
• 27 lower rate votes by Yellen, 0 rate increases
• Diminish volatility in financial markets via “communication”
• Low rate deference to Congressional mandate
• Monetary policy as response to weak fiscal policy and tapering
Senator Corker addressed the failure or lack of effectiveness of the trickle down effect. Low rates
have helped asset prices such as stocks and home prices, which according to Yellen is broadly
beneficial. However, as Senator Corker alluded to, home and stock ownership is elitist as not
everyone owns these assets. Additionally, Yellen also stated the Federal Government has no
business in influencing the stock market. This seems to indicate that the Fed is relying on indirect
economic impact than direct impact. Nevertheless, according to following quote from the Option
Queen newsletter, the Fed's metrics are all wrong:
“An additional unspoken concern is with the measurement of price to earnings ratios
(PE). With interest rates near zero, the PE calculations are out of whack because no
accommodation for a low interest rate environment is being made. It is our belief that
given a fed perpetuated environment of ongoing abnormally low interest rates, PE
should be adjusted to reflect the resulting artificially low cost of money, especially if
compared with times when the cost of money was much higher. If that measurement
were made today, we believe that PEs would not reflect a cheap market, but one that is
getting somewhat frothy.”
4. Questionable policy
This opening anecdote points to the difference between monetary policy's influence on Wall Street
vs. Main Street or mainstream America. Main street, it seems, is more sensitive to less money
being withdrawn from fiscal policy than it is to more money being used to help Wall Street. In
other words, and on first note, monetary policy is questionable in its ability to actually help
Americans, which it is intended to do. The primary beneficiaries of monetary policy are not the
majority of Americans because the wealth effect being generated by the Federal Reserve Bank is
not increasing loan activity, isn't encouraging employers to hire more and does not benefit
individuals and households that do not own equity via stock markets.
Dollar devaluation
The problem of dollar devaluation is evident over time. For example, for $1,000 to have the same
intrinsic worth as it did in 1971 it would now have to equal $5,517.00 in 2011 dollars according to
the U.S. Bureau of Labor Statistics. Now suppose someone put $1,000.00 into a Treasury Bond in
1971 at a 5 percent interest rate and also pays income tax of 28 percent after redemption. That
$1,000.00 bond would now be worth $5,470.89 according to the U.S. Treasury.
The problem is that is even less than the amount of money required to maintain the value from
1971, $46.11 less to be exact. Conclusion, anything lower than 5 percent is insufficient to build
suitable retirement due to inflation. It is for this reason, specific investments such as Treasury
Inflation Protection Securities or TIPS are bought to provide inflation protection.
Money supply
To illustrate the failure of monetary policy's attempt to boost the U.S. economy that the majority
rely on to earn a living one need not look far. A look at the U.S. money supply in the graph below
illustrates this. M1 is one of three measures of money supply and accounts for the sum of total
currency in circulation and transaction deposits and has climbed over $80 billion in just a few short
years.
M2 is the sum of M1 with savings deposits and retail money market mutual funds per The Federal
Reserve Board. The value of M2 is surpassing $10 trillion. In effect, by authorizing the creation of
so much money, the central bank is devaluing the dollar and its purchasing power. What is evident
in both these charts is that the U.S. money supply has grown a little short of exponentially in the
recent past.
6. This money creation trend cannot continue without negative consequence to the economy. It also
reflects just how bad the underlying economy actually is because if the economy were healthy, that
much liquidity floating around would lead to substantial inflation. So what if the economy does not
improve enough? Will money supply continue it's upward climb? The answer is quite possibly and
potentially without inflationary consequences.
Economic asset “bubbles”
Loose monetary policy stimulates asset bubbles because price trends attract capital and become a
money magnet, both nationally and internationally. When investors spot a bubble with room to
expand, that represents opportunity provided the exit out of the bubble prior to its bursting is
orderly and well calculated. The growth created by asset bubbles serves as a stimulus for economic
expansion, and expansion that may otherwise be impossible to attain with more practical, but
stable economic policies.
To illustrate further, as with large companies, developed countries with large economies like the
U.S. have to grow GDP in the hundreds of billions to expand at a rate that can support increased
hiring and substantiate significant capital investment into industrial research, business
development, and government sponsored programs. The need for economic bubbles suggests it is
quite possible the U.S. has reached its economic apex where continued economic expansion at a
consistent rate higher than 1-2% is difficult, and possibly even unsustainable.
Despite the negative effects of bubbles they are also economic catalysts. Bubbles attract investment
capital from foreign countries, create wealth and fuel investments spawned by the increase in asset
values. Without bubbles, financial and economic stasis would be more likely, and although that is
more stable, it also has less near-term economic benefit. For example, consider an economy
without asset inflation, and with GDP growth that remains steady at 1-2%. Such an economy may
only keep up with population growth and currency purchasing power, and does necessarily
increase or decrease in size.
A bubble stimulated economy may grow 3-5% for several years straight. Moreover, according to
Department of Commerce GDP data, U.S. GDP grew an average of 3.82% each year between
1992-2000. That is year over year data as well meaning 3.82% compounded over the previous
year's growth. Although in the 1990s the bubble was actually based in real technological
innovation, a reasonable interest rate environment existed and inflation was actually kept in check
by tightening the creation of U.S. currency per the CATO Institute This bubble was conceivably
caused by over-exuberant investors rather than loose monetary policy. This is not the case with the
equity bubble believed to have been formed with the help of the central bank's current policy of
quantitative easing.
The contrast between industry led asset inflation versus monetary policy led price rises is striking.
Even after the tech bubble of the 1990s had burst, annual GDP did not decline below 1%, a
relatively small price to pay for a bubble that created a lot of jobs, attracted a lot of foreign capital,
and generated massive revenue. The housing bubble that burst in 2008 was not as healthy and was
fueled by inaccurate derivatives valuations, loose lending policies and a surge of speculative real
estate purchases and construction. Interest rates were also much lower in the mid-2000s than the
7. 1990s. Yet this led to a four year average GDP growth of 2.95%, low unemployment and large
corporate, foreign and individual investments. Without this bubble, economic growth may have
only averaged 1-2%, and a recession still might have occurred afterward.
The current economic climate is clearly not healthy and amounts to kicking the can down the road
in exchange for short-term growth. Government spending is out out of control with an excess of
hundreds of billions of dollars each year at the fiscal level, and a cumulative spending pattern in
the trillions of dollars at the monetary level. The big credit card in the sky is losing a strong credit
utilization ratio, which in turn lowers national credibility and raises the cost of national debt via
government security yields. The first domino of economic decline, and possibly more have been
tipped and the clues are evident everywhere. Low labor force participation, declining corporate
revenue, hemorrhaging government debt, chronic currency devaluation and rising precious metal
prices are just a few of the clues.
The magnitude of monetary policy is huge, and when the time comes for the Federal Reserve Bank
to seel its multi-trillion dollar stake in U.S. Treasuries and mortgage backed securities, the results
could be massive. The reason a selling of Fed assets is co influential is because of the massive
value they hold,. Moreover, under the law of supply and demand, a rising supply lowers asset
values and raises yields on Treasuries.
In terms of interest rates, if the economy suddenly grows at a fast rate, tightening access to capital
and interest rates on borrowed funds would not necessarily be performed fast enough to prevent a
corresponding sharp rise in inflation. The result could be economic whiplash as inflation rises
alongside a money supply that can't easily be shrunk.
Debt monetization
The term debt monetization is disliked by the Federal Reserve Bank because it describes the less
economically and socially palatable side of economic stimulus. By buying U.S. Treasury securities,
the central bank is financing the federal government's overspending and earning interest on it. This
is a pattern that cannot continue indefinitely despite the banks statement that it will continue
quantitative easing for as long as necessary. The fact is, as long as necessary is not economically
feasible because of the risk of inflation and to economic growth.
Interest rates versus financial regulations
The Dodd-Frank Act, originally created to overcome risks associated with banking de-regulation
acts as a damper on monetary policy such as low interest rates. This is because stricter capital
requirements for banks and tighter loan application procedures make it more difficult to purchase a
home despite historically low mortgage interest rates facilitated by the Federal Reserve Bank.
Nevertheless, financial institutions have pushed back against the legislation by lobbying for delays
and exemptions.
Another key component of the Dodd-Frank Act is the Volcker Rule. This rule curbs financial
institutions freedom within securities markets and will be voted on by regulators this month.
Furthermore, The Volcker Rule prevents banks from trading in financial securities for their own
benefit rather than that of their clients per the New York Times. To be clear, this rule is a fiscal
8. regulation and not a monetary one, meaning it is not necessarily implemented in conjunction with
the goals of monetary policy, but may counteract some of the effects of monetary for better or for
worse.
Despite the conflict between monetary policy and fiscal regulations, the traditional belief is that
investment rises when commercial interest rates are low. This has been the case to an extent, but
the resulting investments have not included extensive rehiring, Instead corporations have used
cheap money to implement stock buyback programs, and finance capital expenditures on
equipment that improves efficiency. In other words, companies are using the money to get richer
and not necessarily to expand.
Concluding thoughts
At best monetary policy has kept the U.S. economy afloat until something better happens. A
federal sequester, persistent annual fiscal deficits, continual above average unemployment and
declining corporate revenues do not indicate something better has actually happened. Thanks to the
Federal Reserve Bank, a business friendly environment and macro-economy has been maintained,
but businesses aren't exactly gaining market share and increasing their competitive positioning on a
global scale as the U.S. share of global GDP is also shrinking while the population continues to
rise. Mainstream Americans have little to show from monetary policy other than retirement plans
that have risen due to increases in the valuation of high-risk assets. Those rises in equity valuations
will not continue indefinitely and are also a stop-gap until the economy improves in a substantial
enough way to benefit Main Street.
Sources:
1. “MarketWatch”; Shutdown has taken $24 billion out of the economy; S&P; Steve Goldstein; October 16, 2013.
2. “U.S. Treasury”; Growth Calculator
3. “Bureau of Labor Statistics”; Inflation Calculator
4. “WikiCommons”; Money Creation; Akokkone; February 17, 2012.
5. “WikiCommons”; Components of US money supply; Autopilot, December 12, 2010.
6. “Federal Reserve Board”; What is money supply? Is it important?
7. “Zero Hedge”; Charting The Fed's Across The Board Fail; “Tyler Durden”; October 18, 2013.
8. “Zero Hedge”; Lacy Hunt Warns Federal Reserve Policy Failures Are Mounting; October 18, 2013.
9. “Zero Hedge”; Things That Make You Go Hmmm...Like the Freaking Fed; “Tyler Durden”; October 18, 2013.
10. “Zero Hedge”; Ron Paul Knows The Longer QE Lasts, The Worse It Will End; “Tyler Durden”; October 19,
2013.
11. “Department of Commerce”; GDP data; Bureau of Economic Analysis
12. “CATO Institute”; Greenspan's Monetary Policy In Retrospect, Discretion Or Rules?; David R. Henderson and
Jeffry Rogers Hummel.
13. “Business Insider”: Central Bankers Have Gone Wild, And The World Is In Code Red; John Mauldin; October 27,
2013.
14. “Federal Reserve Board”; Does the Fed get audited?
15. “Bloomberg”; Fed Bubble Agonistes Persists As Zero Rates Prompt Debate; Craig Torres and Caroline Salas Gage
October 28, 2013.
16. “Moneycation”; Impacts and purpose of Federal Reserve Monetary Policy; “A.W. Berry & Best Accounting
Schools, July 25, 2012.
17. “Zero Hedge”; Fromer Fed Quantiative Easer Confesses, Apologizes: “I Can Only Say: I Am Sorry, America”;
Andrew Huszar; October 12, 2013.
18. “Zero Hedge”; You Are Here; “Tyler Durden; November 11, 2013.
19. “Moneycation”; What the Federal Reserve Bank's Debt Monetization Means For You; “A.W. Berry”; September
13, 2012.
20. “Stockhouse”; U.S. Federal Reserve Official Apologizes. Goldman Sees More Downside For Gold; Clif Droke;
9. November 15, 2013.
21. “Option Queen”: Archive For October 2013; J.A. Schwartz-Market Analytics.
22. Federal Reserve Board”; Does Monetary Policy Affect Stock Prices And Treasury Yields? An Error Correction And
Simultaneous Equation Approach J. Benson Durham; Division Of Monetary Affairs; Board Of Governors Of The
Federal Reserve System.
23. “GMO LLC Quarterly Letter”; Ignoble Prizes And Appointments; Jeremy Grantham; November 2013.
24. “New York Times”; Volcker Rule On Bank Risk Approaches Its Final Edits; Ben Protess; December 3. 2013.
10. November 15, 2013.
21. “Option Queen”: Archive For October 2013; J.A. Schwartz-Market Analytics.
22. Federal Reserve Board”; Does Monetary Policy Affect Stock Prices And Treasury Yields? An Error Correction And
Simultaneous Equation Approach J. Benson Durham; Division Of Monetary Affairs; Board Of Governors Of The
Federal Reserve System.
23. “GMO LLC Quarterly Letter”; Ignoble Prizes And Appointments; Jeremy Grantham; November 2013.
24. “New York Times”; Volcker Rule On Bank Risk Approaches Its Final Edits; Ben Protess; December 3. 2013.