We Should All Make ‘Investments’ Like This
I’d love to have the opportunity to make investments like this.
By now, I’m sure everyone who reads this blog knows all about JPMorgan Chase’s purchase of what’s left of Bear Stearns. Supposedly, JPMorgan rode to the rescue to save Bear Stearns and possibly ‘the entire Western banking system.’
Gimme a break.
All JPMorgan did was use your money to make an investment. If you boil the deal down, the U.S. government is guaranteeing JPMorgan against losses. I’d love to make an investment like this - there’s no down side risk at all!
Now I’m sure lots of people will argue that doing nothing was not an option for the government. The thinking is that financial institutions are now so tightly entwined by trading (mostly derivatives) that the collapse of one could bring them all down. In fact, Warren Buffett and Bill Gross have been saying just that for years, and I agree. But the way it got this way is from lack of true oversight by the government and years of mistakes by the Fed.
Speaking of the Fed, I’m not sure how many ordinary people realize this, but right now the Fed is accepting mortgage-backed securities as collateral for good-as-gold Treasuries. More of the same from the Fed.
So today they’re expected to cut a key rate. It’s all the Fed seems to know - increase availability of money. And here’s what that means to individuals in a personal finance sense - inflation. Three in four Americans believe the economy is in recession. I think they might be watching the wrong game. I think inflation is a much bigger problem for most people. And it turns out, according to a CNN poll, 91% of Americans agree. But like I’ve said before, inflation is not something you can control, but your response to it is.
March 18th, 2008 at 11:54 am
March 18th, 2008 at 2:01 pm
March 19th, 2008 at 10:30 pm
Inflation is caused by the high money supply in the country, or, to rephrase, inflation IS high money supply itself, NOT the standard “increase in prices” definition we use.
Inflation is caused by :
1. Excess printing of money by the Fed
2. Lower interest rates (cause a lower $, that makes prices for imports increase)
3. increase in level of income of the people of a country
So, the bottom line is “INCREASE IN MONEY SUPPLY”