A Needed Correction in D.C.

16 Oct

One thing that hasn’t been corrected since the 2008 financial crisis is the size and scope of the federal government machine. It’s bigger than ever, especially the Federal Reserve.

The Washington D.C. mainstays blamed corporate entities for the crisis, and as a result, gained more influence.

For example, Fannie Mae and Freddy Mac were made to buy subprime loans to meet objectives that weren’t necessarily rooted in sound business practices.

Various programs, including Quantitative Easing, were put in place in 2008, yet took months or longer to produce results while private money stayed out of private banks.

One could argue these “remedies” produced results immediately, just not the kind we wanted.

Although, perhaps the real reason things turned around was an accounting rule change. No, really.

In March 2009, rules changed around “mark-to-market accounting,” which measures the current market value of an asset or liability, as opposed to its book value.

As the linked article says, issues pop up when market-based measures don’t accurately reflect the underlying asset’s real value. Yeah, no kidding.

Once the rules were changed, money started to move in the economy.

Of course, the government will say it was the economic programs put in place, or some other wave of the bureaucratic hand, that fixed everything. It must to cement its power – it’s human nature.

But the fact remains, the Fed’s current balance sheet is bigger than ever. When it was smaller, the economy grew quicker.

I doubt that is a coincidence.

So, it’s time to end the “government savior” storyline and realize the culprit of crisis is still in place.

2000, version 2.0?

9 Oct

The technical indicators of the stock market are reaching crazy levels. In nearly three years, six tech stocks – Facebook, Amazon, Google, Netflix, Apple and Microsoft – have seen their weighted average price-to-earnings ratios increase 50 percent. Between January 2015 and August 2017, these six stocks’ collective market capitalization accounted for 40 percent of the [...]

A Disastrous GDP Boost

2 Oct

The effect of all the recent natural disasters has been huge, and I’m not talking solely about the hundreds of thousands of Americans who lost everything. The effect I’m talking about is economic. Many cities will need to rebuild. And while this isn’t the best way to achieve economic growth, the rebuilding efforts are expected [...]

Heated Fed Debate Continues as Stakes Rise

25 Sep

The Federal Reserve is in a pickle. On one hand, it wants to raise rates at least once more in 2017. On the other, it wants to reduce its $4.5 trillion balance sheet. Such behavior often leads to a recession. Is this too much shock to our less-than-stable economy? Well, interest rates need to normalize. [...]

The Stock Market is Shrinking

18 Sep

It’s getting more and more difficult to choose investments these days. The possibilities seem endless and it’s not getting any easier as time goes on. Now, you’d think I was talking about individual stocks. But no, I’m talking about stock indexes. They’re often traded as exchange-traded funds (ETFs), which are singular ticker symbols comprised of [...]

Record-Setting Debt Propping Up Recovery?

11 Sep

Americans continue to set records when it comes to household debt. In the first quarter of this year, U.S. household debt, which includes mortgages, student loans, auto loans, credit card debt and more, rose to its highest level ever. In other words, Americans borrowed more money than any other time in history. Total household debt [...]

To Fix Obamacare, Make Congress Use It

5 Sep

How many of you were mad when the Affordable Care Act, or Obamacare, wasn’t repealed or replaced? The Republicans have majority control of the federal government and still could not deliver on one of their hallmark pieces of legislation. But, there is a remedy. The president has the power to order Congress to get health [...]

Financially Healthy States Lean Right, Have Low Taxes

28 Aug

The Mercatus Center at George Mason University aims to “bridge the gap between academic ideas and real-world problems.” Last month, the organization released its report ranking all 50 states on their fiscal health. It examined which ideas are working, which ones aren’t, and the resulting financial conditions left in the wake. The comprehensive study weighs [...]

Spending + Debt = Crisis

21 Aug

You have to hand it to our federal legislators. They really know how to spend. For the first time ever, federal government spending topped $4 trillion. It’s up from $3.85 trillion the year prior. That equals $33,805 for each of the 118,562,000 households in the U.S. Before we go blaming President Trump, it’s important to [...]

Strong Potential for a Global Swan Attack

14 Aug

Last week we talked about the “Orange Swan” effect of President Trump. Well, there are a few more “swans” in the world that could really screw things up. First is the possibility of Janet Yellen getting monetary policy wrong within the context of other domestic reforms. We were promised health care reform, tax cuts and [...]