Federal Reserve Bank of Philadelphia President Charles Plosser said inflation may rise at a rate much higher than the central bankers’ desired range. He notes that the Federal Reserve only has one tool in their control to fight inflation – increased interest rates.
“The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said May 21. However, Plosser cautioned that “the economy is probably not strong enough and not ready for increasing” interest rates.
Charles Plosser has indeed identified the Catch 22 in the liberal’s method to address a down economy by spending far more than budgets allow. Printing money we don’t have devalues the dollar, which means more dollars will be required to purchase the same item (inflation). Meanwhile, in a down economy with high unemployment, household disposable income drops, lowering a family’s standard of living as they have fewer dollars to spend on more expensive goods. As a result, the households tend to cut back on spending money on non-essentials, which worsens the economy as a whole. It becomes a death spiral such as we saw during the presidency of Jimmy Carter.
But Charles Plosser also knows that the Obama administration plans to continue to overspend as no two presidents combined have ever overspent before. This will be a further inflationary pressure. Add to this the economic disaster that would be the twin Statist plans of Obamacare and the Obama/Waxman/Markey Mandate, Cap, and Tax bill, and we have a perfect storm of negative economic actions.
There is no way to sugar-coat the economic results of the Obama plan. They are as foreseeable and predictable as the moon and the tides. As night follows day, economic disaster follows Obama’s Statism.
Showing posts with label Federal Reserve. Show all posts
Showing posts with label Federal Reserve. Show all posts
Friday, May 22, 2009
Saturday, May 2, 2009
Government Moving to Socialize Banks Now
The U. S. Federal government is now in it's final efforts to nationalize up to ten of the nation's largest banks, including Citigroup and Bank of America. This comes as a result of unprecedented “regulatory oversight” of the bank results arising from the Obama Administration’s highly theoretical stress testing.
This theoretical stress testing involved no testing at all, but in fact is a “what if” scenario applied against a heretofore unrecognized equity ratio never before used to take over an ongoing financial institution.
The stress test scenario is as follows: if the bank ceased operations today, what would the shareholders have left in a company if the company were liquidated. The new Federal standard for what the Feds are terming “tangible common equity” is a value of 4% of the institution’s assets, and such assets are arbitrarily assigned a lower value associated with the Fed’s expectation of risk of the asset.
Without saying so, the Feds want to take ownership interests in the banks by saying the preferred shares issued by the banks to the government as a result of TARP funds are held as liabilities, which weigh down the value of a bank’s assets. If the bank would merely convert these preferred shares into voting common shares, it will convert the TARP loans from a debt liability into shareholder equity, raising the asset value of the bank on the books, but not actually improving the bank’s operating position by even $1, since no actual new money is flowing into the bank either via loan or investment.
It is said that certain of the 20-odd banks suffering this unprecedented Federal scrutiny will not be permitted to increase the value of their assets in the normal ways, such as selling shares to private investors or issuing bonds or other debentures, but MUST convert the government preferred shares into common stock.
The Federal government, over this weekend, during the slow news cycle, is trying to socialize these banks by negotiation with weak willed bank officers. These idiots are finding out what happens to the unwary that lie down in the bed of vipers that is the Federal government.
The socialization of the capitalist system is well underway. The government is using as an excuse a what if, worse case scenario that is purely theoretical -- it is not responding to an actual bank failure.
Let’s see if the American public has been zombiefied enough to take it.
This theoretical stress testing involved no testing at all, but in fact is a “what if” scenario applied against a heretofore unrecognized equity ratio never before used to take over an ongoing financial institution.
The stress test scenario is as follows: if the bank ceased operations today, what would the shareholders have left in a company if the company were liquidated. The new Federal standard for what the Feds are terming “tangible common equity” is a value of 4% of the institution’s assets, and such assets are arbitrarily assigned a lower value associated with the Fed’s expectation of risk of the asset.
Without saying so, the Feds want to take ownership interests in the banks by saying the preferred shares issued by the banks to the government as a result of TARP funds are held as liabilities, which weigh down the value of a bank’s assets. If the bank would merely convert these preferred shares into voting common shares, it will convert the TARP loans from a debt liability into shareholder equity, raising the asset value of the bank on the books, but not actually improving the bank’s operating position by even $1, since no actual new money is flowing into the bank either via loan or investment.
It is said that certain of the 20-odd banks suffering this unprecedented Federal scrutiny will not be permitted to increase the value of their assets in the normal ways, such as selling shares to private investors or issuing bonds or other debentures, but MUST convert the government preferred shares into common stock.
The Federal government, over this weekend, during the slow news cycle, is trying to socialize these banks by negotiation with weak willed bank officers. These idiots are finding out what happens to the unwary that lie down in the bed of vipers that is the Federal government.
The socialization of the capitalist system is well underway. The government is using as an excuse a what if, worse case scenario that is purely theoretical -- it is not responding to an actual bank failure.
Let’s see if the American public has been zombiefied enough to take it.
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