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Showing posts from December, 2013

Integrity Counts

When I signed off on last Thursday's posting I had imagined it would be my final one for 2013. But that was before I learned of President Obama's threat to veto a BIPARTISAN bill that would impose new sanctions upon Iran if they failed to live up to their promises in the recently negotiated agreement that the President was so anxious to sign.

Yes, you read that right. The proposed bill in the a senate is entirely bipartisan. And, it is calls for "springing sanctions" which would only kick in if say Iran started to once again do the things they promised to not do, such as to begin producing weapons grade fuel for nuclear a bomb, or testing a ballistic missile, or if they were connected to a terrorist attack.

Inflation, Empathy, and the Fed

I write this as the Fed is in the midst of their final two-day meeting under Chairman Bernanke, and to tell the truth I am feeling a bit wistful.  While, as a big fan of freedom and honesty I cannot say that I ever felt comfortable with the Chairman’s heavy interventionist hand, I am sympathetic to the immense challenges he has faced during his tenure.  In 2008 it really did seem like the world economy was about to collapse from a banking and finance crisis the like of which no one had every quite seen.  And, with global governments including our own flailing for any answers or solutions, it is understandable that the Fed felt compelled to do whatever it could by introducing massive systemic liquidity to calm the storm.

Now, five years hence, the world of finance and investments has become more heavily influenced by the Fed than ever and one must read tealeaves in order to assess what lies ahead. I find myself in rather frequent discussions these days with friends attempting to read …

Bank Confusion

What the heck are “Excess Reserves?”  Wikipedia defines them as: “In banking, excess reserves are bank reserves in excess of a reserve requirement set by a central bank. They are reserves of cash more than the required amounts.”  Well, that clears it up well!  Not!!  I have been reading in so many places that the Fed is contemplating reducing, or even eliminating the interest it pays to banks on these excess reserves, which, if they Fed pays interest on the money in the first place would seem to imply that this money belongs to the banks.  Why else would they be paid interest on the money, right?

But this mystery is not so easily solved.  In the accompanying chart, published by the Fed Board of Governors, it would seem that there were no excess reserves at all in the history of the U.S. banking system until the crash of 2008, at which point growth of excess reserves has been spectacular.  Current disclosures have these excess reserves that banks hold on deposit at the Fed totaling abo…

Freedom

What is Reasonable to Hope For?

I love freedom. To me it is not too different than air, food, and water. Yet, sadly, in America in 2013 there is a reasonable limit to the degree of freedom we can expect to experience. You see, real freedom must always accompanied by responsibility and accountability and those are increasingly foreign concepts in America.

Take the case of Mayor Bloomberg’s ban on the sale of extra-large soda bottles in New York. At the root, this was a move to chip away at the horrible problem of rampant obesity in our nation. Many were up in arms, including freedom lovers who may despise the notion of people glibly consuming massive quantities of harmful liquids but hate the intrusion of government even more. While I sympathize deeply with this sentiment, I've come to understand that freedom cannot be found without the balance of accountability.

Brilliance and Humility

I read this in a week ago Saturday's WSJ and felt it worthy of being reprinted.  If you missed it, it is important to read.  If you read it, it’s worth a re-read. Friedrich A. Hayek is one of the intellectual pioneers of the Austrian School of Economics.  His seminal book, “Road to Serfdom,” is another must read.  The arrogance of many in today’s world has led us to the unstable place we now find ourselves in globally.  Mr. Hayek’s humility is all too refreshing.

Leadership

I’ve always enjoyed basketball, both playing it and watching it.  Like most sports, there are lessons one can learn from basketball that are applicable to other aspects of life including business.

I used to be a devoted Knicks fan, dating back to the last championship seasons of 1970 and 1973.  From the Knicks’ history one can glean that in every organization it is the leadership that sets the tone and ultimately determines the level of achievement.  When the leadership of the team was Walt Frazier and Willis Reed, a certain tone was established – a tone of winning.  Since those teams the Knicks have suffered mightily, and one can easily draw the conclusion that it was because of leadership.

Vice Chair Janet Yellen Confirmation Hearing

Vice Chair Janet L. Yellen
Confirmation hearing (My comments in red)
Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.
November 14, 2013
Chairman Johnson, Senator Crapo, and members of the Committee, thank you for this opportunity to appear before you today. It has been a privilege for me to serve the Federal Reserve at different times and in different roles over the past 36 years, and an honor to be nominated by the President to lead the Fed as Chair of the Board of Governors. 36 years in a leading role for an organization that has missed every single major shift in global macroeconomic forces.Missed the housing finance bubble, missed the tech bubble in 2000, missed the vulnerability of the investment banks’ balance sheets that led to Lehman and Bear’s demise, missed the commercial banks’ weak balance sheets and the European sovereign debt crisis too.What policy changes have been enacted on her watch that would lead anyone to believe that she’s …