Starting in 2009, the Federal Reserve added a couple trillion dollars of new money to the economy through a quantitative easing program of buying bonds from banks and non-banks. Now the Feds reportedly want to reduce their balance sheet by selling those bonds.
“Negative interest rates are another misguided attempt by the Central Banks of these countries to increase bank lending. What they are hoping for is, if they charge banks for depositing money, banks will decide to make more loans to earn more interest and not leave their money at the Central Bank and watch it deplete from deposit fees.”
Retirement plan sponsors it’s time to reconnect with financial advisors and participants as the DOL followed through on its promise to make retirement plans more transparent with three new rules in 4 years.
In the movie All The President’s Men, a source of reporter Bob Woodward nicknamed “Deep Throat” informs him that, to solve the mystery of Watergate, he needs to follow the money. To understand how the stock market can almost triple in value during a period of mediocre economic growth (2008-2017), we must do the same.
This morning a guest on CNBC said spending by companies on plant, equipment, software, etc. was just around the corner. I’ve heard this for five years. However, as long as short-term stock prices determine executive pay, companies will continue to use company cash to push up their stock price instead of investing.
For twenty-odd years, investment spending by companies has lagged, which has caused economic growth to become dependent on consumer spending.