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HomeSense on Cents 2011 Halls of Fame and Shame
Posted by Larry Doyle on January 1st, 2012 12:41 PM |
America wakes up this morning hopeful for a new year filled with peace and prosperity. Sense on Cents welcomes spreading our spirit of optimism.
Before we move forward, though, let’s take an accounting of 2011 and induct those most deserving into our Sense on Cents’ 2011 Halls of Fame and Shame.
Prior to our induction ceremony today, I am sure there are many in the crowd who may want to review our past award winners. On that note, I humbly submit:
Sense on Cents 2009 Halls of Fame and Shame
From the above Fame and Shame lists, I believe the top three in each Hall deserve special recognition. On that note, the medals go to the following: (more…)
Larry Kudlow on Janet Yellen
Posted by Larry Doyle on March 13th, 2010 7:13 AM |
President Obama will likely nominate Janet Yellen of the San Francico Fed to replace Donald Kohn as number two in the hieracrchy at the Federal Reserve behind Fed Chair Ben Bernanke.
What can we learn about Ms. Yellen? Let’s read Larry Kudlow, a highly regarded economist and market practitioner with extensive experience on Wall Street, in Washington, and on the airwaves. Kudlow and Yellen look at the economy from a decidedly different perspective. Kudlow recently wrote of Ms. Yellen’s nomination and what it says about the Obama administration in his Kudlow’s Commentary:
The new Obama Fed is going to be very dovish when it comes to fighting future inflation and defending the value of the dollar. (more…)
Don’t Try This at Home
Posted by Larry Doyle on April 18th, 2009 5:08 PM |
Have you ever watched a stuntman spin a sports car in a sharp 180 degree maneuver? Many stunts come with the advance warning: Don’t Try This at Home.
Not that the current actions of both the U.S. Treasury and Federal Reserve are stunts, but their maneuvers also come with a serious warning signal . . . and it reads: INFLATION!!
Given the doubling in size of the Fed’s balance sheet, if and when the economy catches, the multiplier effect on our domestic money supply will be akin to throwing lighter fluid and a match on a field full of hay. That inferno can create a scenario worse than our current economic predicament.
The WSJ reports:
“The key to preventing inflation will be reversing the programs, reducing reserves, and raising interest rates in a timely fashion,” he (Fed Vice Chairman Donald Kohn) said.
Reversing the programs? With all due respect, if people think the Fed or anybody else is uniquely qualified to drain trillions in liquidity from our markets in a precise manner prior to inflation running rampant, then they are sadly mistaken. Please remember that one of the biggest factors in determining the rate of inflation is the mere expectation of inflation itself. In so many words, our economy may start to experience inflation prior to changes in certain fundamentals in the economy.
While the WSJ reports, Fed’s No. 2 Allays Worries About Stimulus, please remember that any medication that is overused, if not unintentionally abused, can be very dangerous if not fatal. We need look no further than the use of CDS (credit default swaps). CDS used properly provide a valid means of hedging risk. Similarly, increasing the money supply via an increase in the use of the Fed’s balance sheet and assorted Treasury programs can be an appropriate medication.
However, have you ever heard a patient indicate an exact point in time when they knew they were using medication inappropriately, if not in an abusive fashion? Have you ever witnessed a patient who has misused medication to be able to turn his life around on a dime?
I appreciate Mr. Kohn’s confidence in the Fed’s abilities, but neither he nor the Fed have experience in dealing with a situation like this.
Don’t think for a second that the cure can’t be worse than the disease.
LD
Fed Releases Names of AIG’s Creditors
Posted by Larry Doyle on March 6th, 2009 9:03 PM |
Under pressure from Congress this week to release the names of AIG’s creditors, the Federal Reserve’s Vice Chairman Donald Kohn clearly got the message. The Fed has acquiesced in releasing that Top U.S., European Banks Got $50 Billion in AIG AID.
My immediate reaction to this news is how interesting that the bulk of these institutions are European. What does that tell me? These European banks were getting plowed by Wall Street with a lot of sub-prime backed CDOs and when the dam was breaking they wanted to hedge their position. Market speculation is that European institutions own twice the amount of toxic assets as U.S. based institutions. That exposure on top of their delinquent loans in eastern Europe is crushing a number of western European banks. Who are they? Start by looking at the list, included in the above-referenced article, of AIG creditors.
In providing the hedge – which is the insurance – AIG received a fat premium but has been paying for it ever since. Actually, AIG only truly paid for it up until last September . . . the American taxpayer has been and will continue to be paying for it for a long time. Where were the regulators when we really needed them?
LD
