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AMA 94 – Bill Cheney of John Hancock Financial

Bill Cheney of John Hancock Financial guest stars on the American Monetary Association show today to talk about economics. Bill has been a chief economist for the company John Hancock well over the past 27 years and talks a little bit about his experience and where he sees the financial market in the future. 

 

Key Takeaways:

2:30 – The current unemployment rate is understated because many people have their own solo-gigs or unsteady work. 

9:25 – What Bill is seeing in his surveys are that people are more likely to invest and feel less concerned about today’s market.

12:58 – The stock market is not overvalued as long as company profits keep growing.

15:20 – Bill feels we are not a healthy economy yet, but we are a healing one. 

21:00 – Over the years people have been able to buy more stuff, which is why inflation has been adjusted accordingly. 

24:00 – The CPI is the best way to measure how much our lives have improved over the years.  

 

 

Mentioned In This Episode:

http://americanmonetaryassociation.org/

http://jasonhartmanfoundation.org/

www.johnhancock.com/ 

 

The $100 Startup by Chris Guillebeau

Check out this episode!

Lower Credit Standards: Economic Boost or Bust?

Can Lower Credit Standards Hurt the Economy?We’ve always been told that success depends on setting high standards.

Lowering your standards, so the conventional wisdom goes, leads to accepting low quality and ultimately bad outcomes. But in a bid to offset a sluggish recovery, the US government is advocating just that, with proposals on several fronts to lower borrowing standards to make credit available to more people and stimulate consumer activity.

Risky Lending Led to Collapse

The flip flop on borrowing standards comes in the aftermath of the much publicized housing collapse of 2008, when lax lending standards and greedy lenders put complicated mortgages in the hands o unprepared home buyers. After many of those borrowers found themselves underwater or in default, the housing market collapsed.

After that crash sent ripples through the entire economy, the US Department of Justice and a number of state-level attorneys and legislators took at hard look at those wild and wooly lending practices and found many of the perpetrators guilty of outright fraud or grossly misleading borrowers – or both.

Investigations and lawsuits followed, charging the nation’s major banks with a variety of criminal and civil misdeeds. In an effort to hold lenders accountable, the Dodd Frank Act of 2010 and similar legislation imposed new and stiffer regulations on lenders and new protections for unwary borrowers.

Tighter Standards on the Rebound

Mortgage lending, as the leading culprit in the crash, fell under the greatest scrutiny. The Qualified Mortgage Rule was implemented in early 2014 – a standard for mortgage lending put in place by the Consumer Financial Protection Bureau, an outgrowth of Dodd Frank. It mandated that for a lender to have some protection from prosecution for bad loans, its loans had to be held to higher standards in terms of creditworthiness, debt to income ratio and down payments.

The goal, regulators claimed, was to prevent unqualified borrowers – those with lower credit scores and lower incomes in general – from taking out mortgages and other big loans they couldn’t handle. That way, the toxic combination of risky loans to unprepared borrowers couldn’t trigger another massive collapse.

For a while that plan seemed to be working. In 2014, the Federal Reserve hauled back on its ongoing stimulus plan. Interest rates stayed low. Employment picked up a bit and home prices started to rise. But in the midst of these promising signs, another trend emerged.

Fewer mortgages were being approved. Home prices were beginning to rise, housing starts were up – but people weren’t buying. In other areas of the economy, too, things were slowing down. A soft job market meant that people couldn’t buy homes or make other big purchases – a trend that was accentuated by the massive burden of student loan carried by many new college graduates.

Lower Standards to Stimulate Buying?

Worried economists suggested the slowdown in consumer activity could signal another collapse, this one ironically triggered by the efforts made to prevent it. Faced with that possibility, government decision makers opted to accommodate a disheartening status quo.

The old Serenity prayer asks for grace to accept the things that can’t be changed, and the Federal Reserve and lawmakers on both sides of the aisle had to admit that in a rocky economy, credit scores weren’t going to improve much. And the fact that a growing number of middle and lower class consumers had no borrowing power all but guaranteed a slowdown in economic growth.

So the Federal Reserve mad the unprecedented move in the spring of 2014 to request the Fair Isaac Corporation, originators of the most powerful credit scoring system in the country, to adjust FICO scores downward. That would reduce the impact of things like foreclosures and missed payments on an individual’s credit report, and allow more people with a slightly iffy credit history – or none at all – to meet the minimum standards for qualifying for a loan.

That move comes as more lenders have been choosing independently to work with borrowers who have been through foreclosures due to the collapse, or who have struggled with being “underwater” on their mortgages. And now, the Federal Housing Finance Agency, the regulator that oversees government megalenders Fannie Mae and Freddie Mac, is pushing for new agreements to reduce the minimum down payment requirement for a home loan to just 3 percent along with loosening credit standards for loans handled by the two agencies.

That, say FHFA officials, would make it easier for lower income borrowers to get loans to buy houses and other major consumer goods, which would jump start the housing industry and other sectors – and that in turn would get the economy humming again.

Another Collapse on the Horizon? Maybe

But critics of these moves point out that lowering standards is more of an “if you can’t beat ‘em, join ‘em” game that sets up conditions for another collapse. Rather than simply opening the doors to less qualified borrowers, they argue, consumer agencies and the government should focus on efforts to improve borrowers’ ability to manage credit and earn more.

But regulators from FHFA and other bodies point out that the reasons for so many borrowers’ credit and income problems stem from the original collapse – and adjusting standards downward is just an acknowledgement of that new reality. Helping these individuals to get back on track helps the economy as a whole, they argue – and that’s a boost for everyone.

Will lowered borrowing standards mean a boost, or a bust, for the economic recovery? It’s far too soon to tell. But financial experts also point out that it may be a slippery slope with no way back. But with lessons from the past clear and recent, short-term relief for some could mean long-term benefits for everyone. (Top image: Flickr/EGlobe Travel)

Source:

Light, Joe. “ Fannie, Freddie Near Deal to Lift Limits; Concerns Persist.” The Wall Street Journal. wsj.com 17 Oct 2014
Read more from The American Monetary Association:

US Dollar Rides High in World Markets

International Conflict Hits Americans in the Wallet

The American Monetary Association Team

Final_AMA_Logo-150x1502

AM 93 – Former Department of Justice Attorney – Sidney Powell

In the today’s American Monetary Association Show, Jason Hartman speaks to author and former Department of Justice attorney, Sidney Powell. Together, they dive into some of the most scandalous and outrageous cases which have based through the Department of Justice in recent decades. Step-by-step, they overview several of the cases featured in Powell’s book Licensed to Lie: Exposing Corruption in the Department of Justice and consider the true state of our society.

 

Takeaways

01.30 – Sidney Powell’s book, Licensed to Lie: Exposing Corruption in the Department of Justice, deals with some of the most scandalous and historic events to come out of the United States’ Department of Justice.

9.50 – Within the Merrill Lynch case, it got to the point where favourable statements were hidden for six years while four Merrill Lynch executives were sent to prison without even a listed criminal offence.

13.30 – Sometimes there are two sides to a story and you need to dig a little deeper to find out what really happened.

17.25 – You have to question when a judge says he’s never had such a fine person before him for sentencing, and then passes a sentence.

20.50 – www.pogo.org (Project on Government Oversight) has identified over 400 instances of misconduct by prosecutors in the last decade.

22.30 – Despite having a criminal conviction against his name a few days before the re-election, Ted Stevens only lost his place on the Senate by a few votes.

28.15 – The Bar associations are less than useless in these situations because they just give the same response.

32.30 – Judge Sullivan is turning around the Freedom of Information Act lawsuit against the IRS and doing his best to achieve a just result.

34.40 – There are too many aspects of the IRS case that just seem conveniently timed for it to be believable.

35.10 – Many of Sidney’s articles about these issues can be found at www.Observer.com

37.10 – If the IRS is being used to target political opponents, who gave that order?

39.15 – Information about the book and how to purchase it can be found at www.LicensedtoLie.com. Tweet Sidney using the handle @SidneyPowell1 and be sure to ‘like’ Licensed to Lie on Facebook.

 

Check out this episode!

A Cash Free Society? Sweden Leads the Way

A Cahs Fre Society? Sweden Leads The WayHard metal in the hand or virtual numbers on a card, money is what people agree that it is. And now, as Sweden moves quietly toward a cash-free society, the very nature of money – and what it means – could be forever changed.

Sweden has long been in the vanguard of cultural shifts. Its free and easy attitudes toward sex, marriage and marijuana are almost stereotypical. Now, according to a new article from Business Insider, Sweden may be on the leading edge of another revolution – making the shift from hard money to electronic transactions.

In 2013, four out of five monetary transactions in Sweden were conducted electronically, either by electronic transfers or swipes of credit, debit and other kinds of cards. That preference for electronic transactions has led to some unlooked-for consequences. ATMs and other cash-dispensing terminals are becoming few and far between. And armed robberies are rare, since there’s no cash to steal. Bank robberies in particular are at a 30-year low.

In Sweden, everybody accepts cards, prompting one academic to claim that in 20 or 30 years, the whole country could be virtually cashless. That’s a shift caused by cultural preference, not government decree. Anyone in Sweden is free to carry cash and use it – but the trick is finding places that do cash transactions.

Sweden’s quiet slide into cashlessness has people worried: Swedish natives, who claim that cash is a basic human right; Christian conservatives who see a cash free world as a sign of the end times, and financial experts who raise concerns about whether a completely cash free society could be viable – and what that means for other kinds of monetary experiments like the Bitcoin.

Throughout human history, money has had many identities. From the goats handed over in exchange for a daughter’s hand to the gold coins minted by a royal bank, currency has evolved from simple barter to an complex structure represented by symbols on paper and metal. Physical money was always easy to carry and largely anonymous.

But the rise of the credit card changed all that. You could use a card to hold all your money – and even money you didn’t have. Transactions were quick and easy. Ecommerce took the process a step further, with one click online shopping and more. And as more and more businesses and institutions began to accept online payments or payments with cards, cash started to look a little inconvenient and maybe old fashioned.

What’s more, cash costs money to produce, store and manage – costs that are largely irrelevant to the digital world. In Sweden, for example, cash handling costs have plummeted in the last five years, since e-transactions gained such popularity.

But some financial expert worry that over-reliance on electronic money in all its forms could have serious consequences. And civil libertarians worry about the toll taken on privacy.

Going cash free in Sweden – or anywhere else, for that matter – depends on having access to things like computers, electronic banking and credit. For those who don’t have those things, cash is the only option. That locks these individuals out of many services and transactions that depend on the electronic movement of money.

For those who can function without cash, there are other problems. As the world has seen again and again, virtually any database can be hacked, leaving users’ personal and financial information vulnerable to identity theft by people halfway around the globe. And if a major event such as a natural disaster or terrorist attack takes the nation’s power grid offline, the economy of such a cash free country could be plunged into chaos.

In a global world, cashless societies face challenges too. People traveling outside the country would need cash – and so would those conducting business in places that rely heavily on hard money.

And then there’s the privacy issue. Cash has always been the currency of choice when transactions need to be private – for reasons both innocent and criminal. Just about any electronic transaction can be traced back to the parties involved.

Those concerns fueled the development of the Bitcoin – a digital hybrid that promised the convenience of cashless transactions with the anonymity of cash. All it takes is for two parties to agree to conduct a transaction in Bitcoin – a nod to the earliest systems of money.

In most of the world, though, cash is still king. And there’s no law in Sweden or I other countries against using it. Sweden’s tilt toward cashlessness reflects a desire for convenience and economy, not a government mandate. But the trend reveals a new social experiment that pushes the boundaries a little further – and forever changes the way we think about money and the way it works. (Top image:Flickr/DanJ)

Source:
Farquhar, Peter. “Sweden is Going to Be the First Country in the World Completely Free of Cash.” Business Insider Australia. businessinsider.com 13 Oct 2014

Read more from The American Monetary Association:

US Dollar Rides High in World Markets

Do Borrowers Need Banks?

The American Monetary Association Team

Final_AMA_Logo-150x1502

 

US Dollar Rides High in World Markets

The dollar Rises in World MarketsAfter the roller coaster ride of recent recession years, the US dollar is on top again – at least for now. And its strong showing against other world currencies may be due to the Federal Reserve’s much-maligned Quantitative Easing plan.

According to a recent Business Insider article on the performance of the dollar and other currencies, in the third quarter of 2014 the venerable US greenback hit highs not seen since 2010.

That was the period immediately after the great economic collapse of 2007-2009, when the housing market crashed and the nation was plunged into recession. In an attempt to bolster the sagging economy, the Federal Reserve set in motion its much publicized (and much maligned) Quantitative Easing plan, version 3.

The plan involved the massive buyup of mortgage backed securities, which the Fed hoped would keep interest rates low, stimulate the buying of housing and other goods, and get the economy moving once more.

QE3, the most ambitions of the Quantitative Easing put into place after the crash, was met with skepticism by many in the financial community, including officials of local branches of the Fed itself. The Fed’s buyup of over $80 billion in securities every month was keeping interest rates artificially low for an indefinite time, and financial experts worried that when the Fed decided to scale the program back, those rates would rebound to higher levels and trigger another crash as blindsided consumers found themselves unable to borrow and buy again.

But thanks to a brighter employment picture and a stronger housing market, the Fed began in early 2014 to take baby steps – to the tune of $10 million a month – to scale back the stimulus, with the option to kick it into high gear again if conditions changed.

Several months into the “taper down,” though, things haven’t worsened. Interest rates have inched upward, but not by much. And the dollar, as we’ve seen, has surged to its highest level in years, effectively silencing critics of the Fed’s aggressive move.

News about the performance of the dollar goes along with new data released by the US Department of Commerce, indicting an uptick in the Departments estimate of growth domestic product growth – its fastest increase in over 2 years.

That growth makes the US economy the “brightest spot” in today’s world markets, according the Business Insider. And it’s one reason the dollar continues to post gains against other leading currencies, especially in Asian markets.

The dollar continues to attract investors partly because the Fed’s final decision about the fate of the stimulus is still hanging, dependent on a variety of economic indicators. Because the future of QE3 still hasn’t been determined, international investors may be steering clear of US stocks and bonds, preferring to stick with the tried and true dollar.

The behavior of the dollar, and its attractiveness in markets around the world even in the toughest of times, confirms US domination of the world financial system – even as countries such as China surge to the top of the lists of the world’s largest economies.

US Treasury bonds are the backbone of the world’s currency markets, and its banks contribute to the setting of LIBOR rates – international interest rates – worldwide. And the world watches the moves of the Federal Reserve and American megabanks for clues to the behavior of those rates.

The Federal Reserve isn’t alone on the world stage in its efforts to manipulate economies. Other countries, faced with rising unemployment and a stagnant economy, have put into place easing measures of their own – but none so aggressively as the Fed. That, say some financial experts, may be keeping recovery slow and economies relatively weak.

The dollar isn’t without challengers, though. Some fear that China, now the world’s largest economy, might take aim at the dollar and the system it represents in order to claim that status as the go-to financial system for the world. And global conditions are liable to change rapidly, with emerging markets and other parts of the world claming a piece of the pie.

But backed by its longstanding – and very stable – government banking system and an enduing reputation for reliability around the world, the dollar continues to stay the course. And as the Federal Reserve keeps a watchful eye on the progress of the stimulus, the US dollar may still the currency to watch – and to trust. (Top Image:Flickr/squeakymarmot)

Source:
Sano, Hideyuki. “Dollar Hits Four Year High.” Business Insider via Reuters. businessinsider.com. 28 Sept. 2014.

Read more from The American Monetary Association:

Do Borrowers Need Banks?

International Conflict Hits Americans In the Wallet

The American Monetary Association Team

Final_AMA_Logo-150x1502