2012-05-24
For years, we have heard the warnings that Americans need to save more, that the national debt is too large, and that we need to put money away for the future. But what we are really facing here is a two-headed monster. At the same time that we are trying to educate consumers to save, we are rewarding them with low returns for those savings, while rewarding those more in debt with forgiveness.
Under these conditions, who has any incentive to be fiscally prudent? Savings accounts are barely offering interest. Meanwhile, debtors are getting tax breaks on their interest payments and banks are talking about lowering the monthly payments for homeowners facing foreclosure. Borrowers have essentially been given a free pass for their excesses.
Pay it forward
For years, we have heard the warnings that Americans need to save more, that the national debt is too large, and that we need to put money away for the future. But what we are really facing here is a two-headed monster. At the same time that we are trying to educate consumers to save, we are rewarding them with low returns for those savings, while rewarding those more in debt with forgiveness.
Under these conditions, who has any incentive to be fiscally prudent? Savings accounts are barely offering interest. Meanwhile, debtors are getting tax breaks on their interest payments and banks are talking about lowering the monthly payments for homeowners facing foreclosure. Borrowers have essentially been given a free pass for their excesses.
2012-05-17
Greece has resurfaced as a risk-off worry for the markets. The elections in the south European country have cast doubt on the future of Greece's austerity program and in turn have raised the question of whether Greece will be able to stay in the European Union.
In my opinion, if Greece gets kicked out or has a disorderly default, the economic consequences will be small. The real ramification is going to be the precedent that Greece sets for debt negotiations with Italy, Portugal, and Spain. These countries are what Europe is really worrying about.
Greece again
Greece has resurfaced as a risk-off worry for the markets. The elections in the south European country have cast doubt on the future of Greece's austerity program and in turn have raised the question of whether Greece will be able to stay in the European Union.
In my opinion, if Greece gets kicked out or has a disorderly default, the economic consequences will be small. The real ramification is going to be the precedent that Greece sets for debt negotiations with Italy, Portugal, and Spain. These countries are what Europe is really worrying about.
2012-05-08
Everyone is talking about whether the US Federal Reserve Board will engage in another round of quantitative easing — QE3 — when its current QE2 program ends.
What is QE in the first place, and why should it matter? Quantitative easing, at its simplest, represents an extension of Federal Reserve Board activity beyond setting just reserve requirements and target interest rates. The practice has taken the Fed into largely untapped waters of capping interest rates on securities along the curve.
Show us the money!
Everyone is talking about whether the US Federal Reserve Board will engage in another round of quantitative easing — QE3 — when its current QE2 program ends.
What is QE in the first place, and why should it matter? Quantitative easing, at its simplest, represents an extension of Federal Reserve Board activity beyond setting just reserve requirements and target interest rates. The practice has taken the Fed into largely untapped waters of capping interest rates on securities along the curve.
Subscribe to:
Posts (Atom)