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: 


The $100 Startup by Chris Guillebeau

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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)


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

US Dollar Rides High in World Markets

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The American Monetary Association Team



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.



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 – (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

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 Tweet Sidney using the handle @SidneyPowell1 and be sure to ‘like’ Licensed to Lie on Facebook.


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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)

Farquhar, Peter. “Sweden is Going to Be the First Country in the World Completely Free of Cash.” Business Insider Australia. 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



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)

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

Read more from The American Monetary Association:

Do Borrowers Need Banks?

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The American Monetary Association Team




AMA 92 – Editor of Stray Reflections – Jawad Mian

Today’s American Monetary Association program features the founder and editor of Stray Reflections, Jawad Mian, as a guest. He and host, Jason Hartman discuss the current and potential state of Dubai and the rest of the United Arab Emirates before moving on to consider some of the biggest consumer investment issues facing today’s society and looking at the future of bitcoin.



Key Takeaways


05.00 – A lot of the developments and changes happening to Dubai are to provide the desired lifestyle for the growing expatriate community there.

08.00 – Each of the Emirates in the UAE has different societal structures which lead to a different overall feeling of the country.

15.00 – Tourism remains one of the largest and most profitable industries in the Middle East.

17.20 – Transportation and particularly transportation of goods or consumer items is one of the biggest draws in oil reserves.

18.30 – In some ways, bit-coin seems attractive as an alternative currency, but the FBI and the IRS’s insistence that it is taxable property definitely alters some people’s view of it.

22.00 – The volatility of bitcoin as a prospective currency makes it particularly unattractive to merchants.

25.30 – The alleged main aim of bitcoin is to have an economy free from the government, but in the event of any incidents occurring, the only way they could get out from it is with government assistance.

27.10 – For more information about investing strategies and themes, head to

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Do Borrowers Need Banks?

AMA9-30-14Banks are an essential part of the financial landscape – or at least, they’d like you to think so. But are they? New banking alternatives may be making the traditional bank loan a thing of the past.

The traditional banking model has been around for centuries, supersized to today’s massive institutions like Bank of America, Citi and J P Morgan Chase – the ones deemed “too big to fail even when caught red handed in some shady and downright illegal activity in the wake of the financial crisis of a few years ago.

The nation’s big banks were largely responsible for that crisis. Riding the expanding housing bubble, they underwrote massive numbers of highly risky loans that allowed unqualified borrowers to buy houses. But when those loans ballooned and the housing bubble burst, those unprepared borrowers were left with mortgages they couldn’t pay and houses lost to foreclosure.

As the dust settled, details emerged about widespread abuses on the part of those big lenders, including the infamous ”robosigning” scandal that had banks using fake signatures to block process foreclosure paperwork – often on houses that weren’t up for foreclosure in the first place. Add in a seemingly never ending string of Justice Department investigations and lawsuits – some civil, some federal – against Bank of America and others, and legislation demanding better accountability and trust in the nation’s lending system fell to an all time low.

That heightened oversight also meant new hurdles for borrowers. Lending standards tightened as banks tried to avoid penalties for writing bad loans. And interest rates and other fees made transactions more costly for many individual and small business borrowers. Even smaller banks felt the pinch, struggling under a new burden of regulations and oversight triggered by the sins of the big institutions.

Most of us have been trained from childhood to see banks as friendly depositories for our cherished savings, but the real business of banks — how they make money – is in making loans. And big loans to corporations and international entities make the most money of all. Even in the best lending atmosphere, smaller borrowers may be left out in the cold, with more limited borrowing opportunities and higher rates – if they’re served at all.

Enter a host of new alternatives such as monetary exchanges, peer-to-peer lending groups and crowdfunding sites. All these entities share one key feature: they offer a neutral ground for two interested parties to meet and conduct business. Borrowers can find lenders, sellers can find buyers, and individuals can join groups to spread the risk.

Digital currency exchanges may be the best publicized of the new banking alternatives. A whole culture sprang up around virtually anonymous digital currencies such as the Bitcoin and similar monies like the Litecoin, which could be used in any transaction that two parties agreed on. Exchanges provide an interface between the world of digital currency and that of “real” money, offering users a way to convert from one kind of currency to another, buy digital coin and conduct transactions without much of a trace. Much beloved by users in parts of the world that lack stable currencies of their own, the Bitcoin and others like it have survived a few dings to the image from links to online drug trafficking sites like Silk Road to achieve a relatively stable status as a legitimate kind of currency.

Peer to peer lending groups, made easy by the Internet, take the spirit of social media to the investing world. Entities like Lending Club cater to those small businesses and individuals who find it tough to get loans from established banks. These new lending alternatives position themselves as lending marketplaces, where people looking for investment opportunities and those needing funding come together. Like an online dating site, once the two parties meet up, they’re on their own. And while the sites advise participants to exercise due diligence, they don’t monitor the transactions once the parties agree to conduct business.

Crowdfunding takes the process a step farther. Sites like EquityNet, Crowdfunder, IndieGoGo and even Kickstarter let individuals and enterprises get projects that need funding in front of potential investors and supporters. There are no fees involved, and the project creators are free to set any terms they wish. Transactions are one time only and don’t ‘involve much by way of traditional lender paperwork. When the bank says no, these options give startups and new entrepreneurs a foothold for launching enterprises of all kinds, from buying real estate to creating a boutique baby shop.

Advocates of the new lending and money exchange models say they return the power to the people, bypassing lender fees and restrictions to allow two parties to agree on their own. They stimulate economies too, by helping launch startups and encouraging investment. And by focusing on doing one job and doing it well, they avoid much of the fraud and manipulation that came to light with traditional banks.

The downside, say critics, lies in the most prized aspects of peer-to-peer transactions. Though they’re completely independent of the banking system, they also lack the safeguards around traditional lending. Both parties are largely on their own if the deal goes bad. And the anonymity promised by Bitcoin exchanges and other sites means it can be hard to track illegal transactions and fraud.

Concerns aside, peer to peer financial exchanges are here to stay – and growing. Reflecting both a mistrust of the old ways and an eye to the future, peer-to-peer platforms may not put banks out of business – but for some borrowers, they’ll give those institutions a run for their money.  (Top image: Flickr/KevFoster)

Cohen, William. “Bypassing the Bankers.” The Atlantic Business. 13 Aug 2014.

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The Fed’s Stimulus Strategy: Silencing Skeptics?

Money Talks – But What Does It Say?

The American Monetary Association Team




The Fed’s Stimulus Strategy: Silencing Skeptics?

AMA9-16-14In the end, did hard easing work?

That contradictory term for Qualitative Easing version 3, the Federal Reserve’s controversial and much disputed stimulus plan, has been in the news and on the minds of economists and financial advisers since it was conceived in 2012 as the latest attempt to boost the nation’s economic recovery.

From the beginning, the plan to force interest rates to historically low levels faced harsh criticism from experts worried that it might do far more harm than good. But several months into the slow ‘tapering’ of the stimulus, the sky hasn’t fallen, interest rates haven’t skyrocketed, and the dollar has surged back stronger than ever. That’s news to silence the skeptics, but does it indicate a rosy future?

What’s Qualitative Easing?

QE3 is the third incarnation of “easing,” an unconventional strategy to jump start the economy by buying up securities and bonds in an effort to keep interest rates low. Banks that sold those securities to the government wouldn’t have to raise interest rates to consumers, who could then get more loans to buy more things, such as houses and cars.

Or so the theory went. This kind of strategy was first fielded back in 2009,the year after the famed bursting of the housing bubble and the historic collapse that saw millions of people losing their home to foreclosure and banks caught red handed in a variety of financial scams and schemes.

The nation’s consumer economy was in ruins. The banks held trillions of dollars in bonds and securities backed by mortgages – many of them held on foreclosed properties. Quantitative Easing version 1 was put into place in 2009, tapered lightly later that year and then rebooted as QE version 2 in 2011.

QE3, the current version, hit the scene in 2013 with the ambitious goal of buying up $85 billion worth of bonds and securities every month until further notice. When would the Fed “taper,” or wind down the plan? No one was exactly sure. It all depended on the health of economic indicators such as job growth and housing starts.

QE3 Under Fire

The very scope of the plan raised concerns. Criticism came from without and within, as the chairs of regional Federal Reserve banks expressed doubts that the stimulus would be sustainable.

Others worried that artificially holding interest rates to historically low levels thanks to the bond buyup would mean a drastic rebound once the stimulus was withdrawn. Rates would suddenly shoot up, they fretted. That could shut off the credit pipeline to millions of borrowers, casting a chill over the still recovering housing market and slowing the purchase of other kinds of high-end consumer goods. And that might depress the job market even further.

Other kinds of worries surfaced, too. Some analysts claimed that the plan, which was supposed to help average Americans get loans, actually did just the opposite, enriching banks, which happily took government money but never passed on those benefits to their customers.

International money market observers were also concerned. Thanks to the effects of the economic collapse, the dollar had suffered a bumpy ride in the global currency world, with cycles of slumping and then rallying briefly against other currencies such as the euro, pound sterling and yen. The plan also affected international interest rate calculators such as LIBOR, with ripples in markets halfway around the world.

Although critics had to grudgingly admit that the lower interest rates were helping to boost housing and help breathe new life into other areas of the economy, they weren’t convinced that the recovery would hold up once the Fed decided to really ease back on the throttle.

That didn’t happen until the early summer of 2014, when after months of debate and equivocation, the Federal Reserve under its new chair Janet Yellen opted to start a cautious tapering down, pruning a mere $10 billion off the monthly stimulus tab in response to better job numbers and more housing activity.

The financial world watched with bated breath. Critics waited to be vindicated.

But not much happened. Interest rates have begun a slow creep upward, pushed by market forces now that the Fed’s artificial manipulation is slowly being withdrawn. There’s been a slowdown in mortgage applications, but industry analysts blame tighter regulations ad stricter lender accountability for that as well.

Perhaps the biggest challenge to the plans’ naysayers comes from the performance of the dollar. Amid dire warnings that the stimulus could destroy he dollar and drive inflation to recorded levels, the greenback has surged in world money markets, posting its best performance in over a year.

What Investors Need to Know

The economy still isn’t in perfect health. And the Fed has the option of stopping –or revering – its taper-down if conditions worsen again. Interest rates can still raise more –and the housing market struggles with a 19 year low in homeownership. But as the dollar outpaces the currencies of countries that have taken a more conservative approach to managing their economic crises, even critics of “hard easing” are admitting that maybe the Fed was right after all.  (Featured image:Flickr/eguidetravel)


Roesler, Matthew. “A Complete History of Quantitaive Easing in One Chart.” Business Insider. 25 Jan 2014.

Weisenthal, Joe. “We Might Be Witnessing the Final Humiliation of the Fed Haters.” Business Insider. 16 Sept 2014

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International Conflict Hits Americans in the Wallet

America’s Forum With J D Hayworth

The American Monetary Association Team



International Conflict Hits Americans In the Wallet

International conflict hits local walletsIt’s a small, small world, as the old song goes. And that’s increasingly obvious as events across the globe have the power to hit Americans hard at home. In a world that’s ever more connected, global conflicts can quickly become local ones, with consequences for the US dollar, energy reserves and consumer goods, and the economy as a whole.

The ongoing Russia-Ukraine crisis offers a real time example. Many Americans would be hard-pressed to locate this former Soviet republic on a map, let alone pronounce the names of its cities and leaders. But as sabers rattle, discourse heats up and the world ponders what to do, events on the economic front are rippling quietly through the countries of Europe and across the oceans.

At the heart of the battle is conflict over Ukraine’s unpopular leaders to pursue closer ties with Russia and abandon a pact with the European Union, which many Ukrainian nationalists hoped to see.

Rhetoric gave way to violence, with Russia trying to assert some of its age-old aspirations for dominance over the region. One key reason; Ukraine’s rich reserves of oil and gas, and the area’s agricultural productivity, which helps feed not just Russia, but also Europe and the rest of the world.

Energy and Agriculture

Though Russia dominated the news about the conflict, it’s not the only country with significant interests in Ukraine. The country hosts several major oil and gas pipelines that feed resources to Europe and the energy markets of the rest of the world. That could mean significantly higher prices for gas and oil in an energy-starved global community.

And while Ukraine’s status as the “breadbasket of Europe” accounts for about 20% of Russia’s agricultural imports, numerous other global powers including China, the US and Canada have a substantial interest in Ukrainian products. And disruption in agricultural production and exporting from Ukraine could mean higher prices and shortfalls of some products not just in neighboring countries, but anywhere Ukrainian products are sold or used for the manufacturing of food and other goods.

Business and Investing

Travel and tourism also take a hit during conflicts – and Ukraine’s pretty Black Sea beaches and picturesque landmarks won’t see many foreign tourists for some time. That affects not just the country’s own economy but also the travel industry as a whole, forced to readjust plans and prices to accommodate the risky political situation.

Foreign investments in real estate and other local assets can also be affected by a country’s political and economic turmoil. Foreigners with money to spend look for stability and reliability in their assets. And a shifting political and economic climate that could turn violent at any time makes investors leery of starting or continuing investments in local land and business.

Loopholes in US tax laws allow companies to practice “tax inversion” – a practice of moving operations to another country with lower costs and lower wage workforce in order to avoid US corporate taxes. The practice allows American corporations to take advantage of a country’s troubled economy buy partnering with a local business, which offers a way to move all operations offshore.

But serious instability in that region could compromise the US side of such a merger. And even though those companies don’t pay American corporate taxes on their earnings overseas, their US connections and subsidiaries do, in a domino effect that affects shareholders, workers and consumers at home as well as abroad.

Currencies and Debt

As political conflicts veer toward violence, a nation’s currency may take a tumble in world markets, losing value due to the instability. Financial experts expect the Russian ruble to take a dive in the face of world outrage and the specter of sanctions. But once a major currency falls, others scramble to regain footing, with repercussions for the values of major monies such as the US and Canadian dollars, the euro and the Chinese Yuan.

The threat of armed conflict isn’t the only reason a country’s currency and contributions to the world markets go on the rocks. Mismanagement and corruption, or forced regime changes in an area or country can also ripple out to touch Americans where they live-in the wallet. A poor economic outlook in one area can touch us thousands of miles a way – sometimes in odd ways

Currency problems, the availability of essential resources and the iffy nature of investing in unstable countries can all affect what we do with our money every day. The crisis in Ukraine offers just one example of how interconnected the world really is. It doesn’t take bombs and warplanes to force changes that affect people on the other side of the globe – sometimes; the merest fluttering of butterfly’s wing will do the trick.  (Top image: Flickr/jayalaharam)

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The American Monetary Association Team


FICO Score Changes: A Boost For Risky Borrowers?

FICO Changes Boost Scores for Risky BorrowersFair Isaac is changing his game. And that has some financial experts worried.

The nation’s premier credit scoring agency, the Fair Isaac Company, has come to an agreement with the Consumer Financial Protection Bureau to change the way credit scores are calculated. It’s a move that could boost lower end scores by 25 points or more by ignoring certain kinds of bad debt.

And that, financial experts fear, could create a landslide of bad debt, as risky borrowers are suddenly able to qualify for loans they can’t actually pay off. That scenario raises the specter of another economic collapse like the one that hit the housing industry back in 2008.

Why the Changes?

The housing crisis of ’08 put the spotlight on a bevy of bad practices on the part of both lenders and borrowers. As the housing bubble began to expand, banks made home loans available to just about anybody who asked. Adjustable Rate Mortgages made initial payments low and easy – and many borrowers didn’t understand that that could change dramatically in a few months or years.

Then the crash happened. Homeowners fell behind when those balloon payments came due. Houses everywhere fell into foreclosure. And the nation’s big banks were caught in a variety of fraudulent practices, including faking foreclosure paperwork and lying to customers.

All that led to the implementation of some wide-ranging legislation to try to keep it from every happening again. The Dodo Frank Act took effect in 2010 – an attempt to protect consumers by imposing tighter lending standards and penalizing banks that chose to keep writing loans that fell outside the provisions of the new Qualified Mortgage Rule.

But those standards locked many borrowers with lower credit scores and trouble meeting down payment requirements out of the process. The result? Far fewer loans for major purchases such as home buying – and that raised worries about the future of the economic recovery.

Enter the Consumer Financial Protection Bureau. Created under the provisions of the Dodd Frank Act, the CFPB’s job was to do exactly as its name says – to protect people from bad and misleading financial practices and to help borrowers in trouble.

Now, in a move that ironically reverses tenets of the Dodd Frank Act that created it, the CFPB is asking FICO to loosen its standards to allow more people with blights on their credit report to qualify for mortgages and other kinds of loans. It’s a move that, the government hopes, will jump-start the sluggish housing market and the economy as a whole.

FICO’s New Moves

FICO scores set the standard for most borrowing the US. According to a recent Huffington Post article on the CFPB’s actions, over 90 percnet of all loans in the country are based on FICO scores. Those scores help lenders set interest rates and determine their own level of risk. They’re also used by employers as part of the hiring process.

Fair Isaac is not a government entity – but in this case it’s changing major parts of its credit scoring process to address the CFPB’s concerns. Those involve:

Bad debt discharged through collections. If a borrower clears an unpaid debt through an arrangement with a collection agency, that debt won’t be a factor in calculating the FICO score.

Medical debt. It’s well known that medical debt, especially hospital related debt, is one of the leading causes of bankruptcy in the US. Under the proposed FICO changes, medical debt would have less impact on credit scores. And if it’s the only debt a person has, their score might jump 25 points or more.

People with skimpy credit history. It’s always been true that the less debt you have, the more of a credit risk you are. Now, FICO is implementing new ways to calculate creditworthiness for people with little credit history, so that they can end up with a higher score.

Who’s Affected?

The changes to FICO’s scoring system are intended to directly affect those who have been denied credit in recent years because their scores fall below the cutoff point for what lenders have determined to be safe lending.

That should open doors for these marginal borrowers to qualify for loans to buy homes and other big purchases, which in turn would jumpstart the economy. Advocates of the changes, which include consumer advocates as well as financial professionals, praise the move as a way to encourage more participation in the economy and help people build stability and security.

But critics of the move argue that the change in scoring is nothing but a numbers game. The higher scores borrowers would have under the new system don’t actually reflect an improvement in their ability to repay a loan – and ignoring bad debt cleared through collections won’t make the borrower’s behavior improve next time around.

That, they say, could create a backlash that forces lenders to tighten standards even more, or raise interest rates. Another housing crisis could hit as risky borrowers default again, with conseque3nces for the economy as a whole.

The changes to FICO”s scoring system won’t take effect until this fall, so it’s too early to tell which scenario will play out. But the CFPB’s plan to change the borrowing landscape has the potential to affect borrowers everywhere – even if their own credit is sterling.   (Featured image: Flickr/JanetRath)


Frankle, Neal. “How Upcomng FICO Credit Score Changes Might Rock the Economy.” The Huffington Post. Huffpost Business. 26 Aug 2014

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Money Talks — But What Does It Say?

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The American Monetary Association Team

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Money Talks — But What Does It Say?

Money Talks But What Does It Say?What does your money say? Of course, most of the time, we’re more concerned with what money can buy – and what various institutions like the Federal Reserve and the megabanks are doing with it. But a country’s history, culture and values are written on the coins and bills it keeps in circulation. Case in point: the lowly US dollar bill, which contains in its often-misunderstood symbols and slogans the dreams and aspirations of its founders.

The images and words that appear on paper and metal money aren’t static. They change over time to accommodate new circumstances – and political conditions. US currency alone has undergone several permutations as a result of the country’s changing configurations and events like the Civil War. And in other parts of the world, new money commemorates changing regimes and leaders.

Money Talks In Symbols and Slogans

Because money acts as a kind of shorthand for what the issuing country stands for, every image and word printed or stamped on stands as a symbol with layers of deeper meanings behind it. And as those meanings become hazy with time, the symbols themselves can take on entirely new meanings their creators never intended.

Most officially circulated currency carries at least the image of a prominent individual, a motto or slogan, and a symbol representing what the country stands for. Beyond that, money can carry a variety of images and slogans.

Take the dollar, for example. The greenback and its cousins the bigger denominations are recognized around the world. Everybody knows who’s on the bill – George Washington  – but what done the other parts of the dollar represent?

Seals, Symbols and Portraits

Franklin wasn’t always on the bill, though. Back in the 1860s, the face on the dollar bill was actually that of Salmon P. Chase, the Secretary of the Treasury. And at that time there were actually several currencies in circulation as the Confederacy printed its own money and Texas declared itself a Republic with its own money too.

Those things aside, though, the key elements of American money haven’t changed too much since their creation not long after the country was born. And those mysterious symbols that raise the specter of black magic and Satanism were the brainchild of a designer inspired by the poetry of Virgil and the history of Egypt.

The face of the dollar, like other denominations, has a Treasury Seal. It consists of a scale, representing balance, a chevron with 13 stars for the 13 original colonies and a key symbolizing official authority. Until 10996 each banknote carried a Federal Reserve Bank designator that indicated where it was produced. Now, only the dollar and $2 bills carry this unique designator, a letter that proclaims the bill’s origin. Larger denominations simply carry the general Federal Reserve System Seal.

The Great Seal: Eagle and Pyramid

The dollar bill and others also carry the Great Seal of the United States – complex creation consisting o an eagle and an unfinished pyramid.

The eagle’s meaning is pretty clear – but even at that, its symbolism has stirred some controversy. The Eagle of course represents freedom and independence, soaring high and strong. There’s a shield on its chest, covered with the red, white and blue stripes and stars we’re familiar with: thirteen stars for the original colonies and blue for justice, white for purity and red for valor.

This eagle bears thirteen arrows in its left talon, representing war, and an olive branch in the right representing peace. But it’s the other part of the seal, with its mysterious eye atop a pyramid, that fuels speculation of darker meanings.

What does an unfinished pyramid with an all seeing eye on top say about the country? This symbol on the Seal, along with its inscription, “Novis Ordo Seclorum,” – “New World Order” — has fueled speculation about Masonic influences, alchemy and even Satanic references. But according to Charles Thompson, who designed the Seal in 1782, the truth is more mundane.

The pyramid, deliberately left undone, was meant to symbolize strength and duration. While that may call for a stretch of the imagination, the all seeing eye, said to represent watchful Providence, is clearer. And the inscription, inspired by Virgil, was meant to indicate that the birth of the country introduced a new direction into the world – not world domination.

The dollar and its relatives in the higher denominations have been redesigned and refurbished from time to time. Colors have changed slightly and the relative prominence of various elements has shifted. The symbols and messages on the greenback may have been misunderstood and even maligned, and its fortunes go up and down in the world’s money markets. But still it bears on its printed face keys to the early days of the country – and the vision its founders had for the future.  (Featured Image:Flickr/imagesofmoney)

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AMA 90: Work the System with Sam Carpenter

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Carla and The American Monetary Association Team



AMA 91 – America’s Forum with J.D. Hayworth

J.D. Hayworth is a former Arizona Republican Congressman and host of “America’s Forum” on Newxmax TV.


Hayworth discusses why Bill Clinton’s Presidency so corrupt and what this corruption means for Hillary’s bid in 2016.


Hayworth contested John McCain and did not win in 2010. He explains the biggest issues he had with McCain. 


Hayworth finally shares how he went from sports broadcaster to politician.


J.D. Hayworth was a Representative from Arizona. Born in Highpoint, Guilford County, N.C., July 12, 1958, he graduated from High Point Central High School, Highpoint, N.C. and earned a B.A. from North Carolina State University in Raleigh. He’s a former television and radio journalist, before being elected as a Republican to the One Hundred Fourth and five succeeding Congresses (January 3, 1995-January 3, 2007). He was an unsuccessful candidate for reelection to the One Hundred Tenth Congress in 2006. 



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AMA 90 – Work the System with Sam Carpenter

Sam Carpenter author of, “Work the System: The Simple Mechanics of Making More and Working Less.” He joins the show to discuss how can people make more money by working less.


With a background in engineering, publishing, journalism and telecommunications, Sam is author of the book, “Work the System: The Simple Mechanics of Making More and Working Less,” (2009, Greenleaf Book Group, He is also CEO and majority owner of Centratel (, a national telephone answering service that he has operated for 28 years. Sam is founder and director of Kashmir Family Aid, a 501C3 non-profit aiding surviving school children of the Northern Pakistan and Azad Kashmir earthquake of October 2005 (  


Outside interests include mountaineering, skiing, cycling, reading, traveling. “Work the System” won the prestigious “Best Non-fiction” award at the New York Book Festival. The book is now in its third edition. Sam also owns a consulting firm and distributes an on-line product, The Work the System Academy ( Originally from upstate New York he lives in Bend, Oregon and Seattle, Washington with his wife Linda.


Get “Work the System” at


Visit the Work The System Academy at


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AMA 89 – The Truth about Gold and Silver with David Morgan

David Morgan is Publisher of The Morgan Report. He joins the show to discuss what’s next for gold and silver after the FOMC’s latest announcement and the news in Iraq. 


In the interview, Morgan shares whether investors should trust this metals rally. He explains why silver is a better currency and more ubiquitous than gold. 


Morgan then discusses how levered banks are and if financial institutions have learned anything from the 2008 crisis.


Seduced by silver at the tender age of 11, David Morgan started investing in the stock market while still a teenager. A precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems ahead and reasons for investing in precious metals.  


David considers himself a big-picture macroeconomist whose main job as education—educating people about honest money and the benefits of a sound financial system—and his second job as teaching people to be patient and have conviction in their investment holdings. A dynamic, much-in-demand speaker all over the globe, David’s educational mission also makes him a prolific author having penned “Get the Skinny on Silver Investing” available as an e-book or through As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. Additionally, he provides the public a tremendous amount of information by radio and writes often in the public domain.


Find out more about David Morgan and his work at

Check out this episode!

Can Corporate Tax Inversions Harm the Economy?

Can Tax Inversions HarmtheEconomyThe chief financial officer of drugstore giant Walgreen’s just departed his job. And while the movements of higher ups at megacorporations often resemble a round of musical chairs, this particular job change sheds light on a new trend in corporate tax evasion: tax inversion.

Tax inversion is a milk toast term for a sweeping strategy that’s being increasingly embraced by large and some mid-size American corporations: partner with a foreign corporation, dissolve the US business and reincorporate it outside the country. While technically legal, this kind of move worries entities like the US Joint Committee on Taxation, which estimates that tax inversions cost the country – and its taxpayers – nearly $20 billion annually.

Tax Inversion Exploits Tax Code Loopholes

US corporate taxes are among the highest in the world, so it’s no surprise that businesses of all sizes are constantly looking for ways to avoid the hit. And while proposals for business tax reform have been on the table for over two years, Congress still hasn’t taken action on reforming the code in ways that would benefit the economy as a whole and create a more equitable tax structure.

But the existing code does come with loopholes that savvy corporate lawyers can exploit. And one of those is a provision that creates tax benefits, not liabilities, for companies that acquire foreign corporations and then declare that they’re based overseas.

At Walgreen’s, the departure of CFO Wade Miquelin came just before the company announced its intention to acquire Alliance Boots, a Switzerland based company that has no apparent connection with pharmacies. That acquisition lets Walgreen’s reconstitute its corporate headquarters abroad – and shed a large portion of its US corporate tax burden.

Offshore tax havens aren’t new, of course. Putting US money into foreign accounts to stash it safely away from the taxman is a time-honored practice conducted by businesses large and small – as well as numerous criminal organizations. But as that strategy gets riskier, corporations are taking a different tack – recreating their corporate identify itself outside the country. Making it easier: the ability to buy up, merge or partner with an existing company in that foreign country.

Tax Inversion and Domestic Tax Revenue

The result? The new entity on foreign soil doesn’t pay corporate taxes at home on profits made through its reincarnated, offshore, version. And that, obviously, means that tax revenue ends up conspicuously absent from the domestic tax base – a scenario with the potential to affect the health of the economy and the lives of American taxpayers in a multitude of ways large and small.

According to a recent Forbes article, the immediate impact of tax inversion is felt by company shareholders, many of whom are smaller investors. If they’re left holding the bag of nearly useless shares after the company moves offshore, they may end up selling off their shares of the company’s stock at a loss – and paying the higher taxes imposed on short-term capital gains.

That’s what happened with the recent merger of US based Forest Laboratories with ActivusPLC in Dublin. Forest Laboratories closed its US operations and reinvented itself in Ireland, leaving Forest Laboratories company shareholders to cope with unloading their shares and paying the resulting capital gains taxes at the higher short term rates.

That multibillion dollar tax loss, say financial experts, also robs the country of needed funds to keep the economy humming and boost sectors such as employment and maintaining the infrastructure. But not everyone agrees.

Although corporations practicing tax inversions are able to evade taxes on revenues made outside the country, they still must pay standard US corporate taxes on revenues fro inside the US. That, some economists argue, offsets the overall loss of tax revenues. And, they say, the process itself oaf dissolving and reincorporating the company brings with it taxes and fees that return to the government.

Joining the criticism of tax inversion are supporters of the President’s recent proposal, which has languished since 2012 without government action. They say that the current loophole that allows for inversion stacks the decks against those businesses that aren’t able to accomplish a foreign merger and restructuring, and robs the country of much needed revenues for essentials like road and bridge repair and emergency response funding.

Closing the Loopholes With Tax Reform

The proposed corporate tax reforms would make it harder for a US-based company to reinvent itself as a foreign entity and continue to enjoy the perks of its US based operations. Foreign shareholders would have to hold a majority in the new entity, rather than the 20 percent now required. Those provisions were part of an earlier bipartisan proposal made back in 2004, and reform advocates hope that the changes will survive.

In the meantime, though, tax inversion remains a hotly debated issue. And as more US corporations enter into unlikely partnerships with foreign businesses for the purposes of avoiding US corporate taxes, the ultimate effect on the economy overall may be more uncertain than it first appears. But financial experts warn that because changes to the tax code won’t be coming any time soon, corporate tax inversion will affect the nation – and its taxpayers – in ways large and small.

(Top image: Flickr/KevinFowler)


Madhani, Amer. ”Walgreen’s CFO Departs Ahead of Tax Inversion Announcement.” USAToday Finance. 5 Aug 2014.

Wastall, Tim. “The US Treasure Would Not Lose $20 Billion From Corporate Tax Inversions.” Forbes. 5 Aug 2014.\

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AMA86: Crowdfunding with Matthew McGrath

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Carla and The American Monetary Association Team

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AMA 88 – Crowdfunding with Matthew McGrath

Matthew J. McGrath is the President and CEO of Optimize Capital Markets. He joins the show to discuss institutional crowdfunding and how the JOBS Act infringes on investors’ protections rights.  


Optimize Capital Markets is Canada’s first and longest running internet-based institutional crowdfunding company. The company operates, an online website where businesses can request to get financing from potential accredited investors and institutions. 


Optimize Capital Markets was founded in September 2009 by Matthew McGrath, a former vice-president of private client services at the Royal Bank of Canada. 


Visit Optimize Capital Markets at

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AMA 87 – Inflation and Economic Woes with Charles Goyette

Charles Goyette is the Host of “Ron Paul’s America” radio show. He joins the podcast to give his dramatic solution to prevent the coming financial ruin. 


Goyette believes the longstanding practice of crony capitalism strangles our economy. He thinks we need to reign in overseas spending and end American interventionism. 


Goyette then explains whether it is fair for younger people to subsidize older people.


New York Times bestselling author Charles Goyette spent many years as an award-winning and popular Phoenix radio personality. Admired for his “Fearless Talk Radio,” Charles was named Best Phoenix Talk Show Host by the New Times. Because of his insistence on holding all poiticians – regardless of party – accountable to the same strict standards, Charles was widely known as “America’s Most Independent Talk Show Host.” His years of experience as a financial professional have served his listeners well as he sounded the alarm about the mortgage bubble well in advance of the calamity and described the consequences of the governments reckless economic behavior in his clear, easy to understand manner. 


Charles is no newcomer to the national economic debate. In fact, more than 25 years ago Charles arranged for a then little-known Texas Congressman named Ron Paul to be the keynote speaker at a series of monetary conferences he hosted. Goyette has often been called on to share his views with television audiences nationally on Fox News, CNN, MSNBC, PBS, CNBC and Fox Business Channel, including on the Glenn Beck Show and The O’Reilly Factor with Bill O’Reilly on Fox News; NOW with Bill Moyers on PBS; and on Lou Dobbs Tonight on CNN, where he repeatedly warned before the current turmoil the “economic calamity the Republicans and Democrats” were creating. He has written for a number of magazines including The American Conservative and Gannett magazines, and for, and


Listen to “Ron Paul’s America” at

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AMA 86 – Banking Bail In with John and Monica Miller

John and Monica Miller are the authors of, “The Coming U.S. Banking ‘Bail In.’” They join the show to discuss if it is true that in the U.S., Canada, New Zealand, and the EU, when you deposit funds in your bank account, the money belongs to the bank. They share what first world “Triple A” countries are not part of this bank money grabbing initiative.


The Millers definte what a “bail in” is and answer whether the FDIC program offsets a “bail in.” They also describe the process of sending money overseas to avoid a “bail in.”


They then talk about the U.S. banking system and how Americans can side-step the “bail in” problems.


Find out more about John and Monica Miller at


John and Monica Miller, formerly of Hawaii and now residents of New Zealand, believe that Australia offers some of the best financial conditions in the free world. The Country is debt-free and the wealth is staggering. It is a resource based economy that is still prospering. 


Therefore, before capital controls and retirement account seizure takes place, this is certainly a place that should be considered when trying to internationalize assets. And while they drive on the wrong side of the road, the weather is quite nice, and there are some incredible beaches and cities.

Check out this episode!

Can Living Wills Prevent Another Banking Collapse?

AMA7-28-14People make living wills – and now, so do banks. To prevent a major financial meltdown like the one that hit the country in 2008, major US banks are now required to create a contingency plan for failure and submit it to government regulators. But because those regulators haven’t been monitoring those “living wills,” the safety net protecting consumers from another crisis is still full of holes.

The Post Collapse Clean Up

The banking collapse of 2008 devastated the country. Mismanagement, fraud and reckless lending crated a bubble that burst in spectacular fashion, leaving the housing market in ruins and the economy on shaky ground. That’s when the nation’s biggest banks, also the worst offenders, were deemed “too big to fail,” and massive bailouts kept them functioning

In an attempt to prevent more scenarios like this, the government stepped in, passing the sweeping Dodd-Frank Act in 2010 to impose more accountability on the banking industry and protect consumers from predatory practices and their own bad judgment.

Among the many requirements of the Act was the “living will” mandate. The country’s biggest banks, including Bank of America, Citigroup and JP Morgan Chase, had come under investigation by the US Justice Department and various state attorneys general for wide ranging fraud and mismanagement that put millions of homes into foreclosure nationwide as well as other financial crimes affecting not just domestic but also international financial activities.

But because those banks were the linchpins of the country’s financial structure, a collapse, either due to bankruptcy or illegal dealings, remained unthinkable. They were still too big to fail, which meant that anther crisis would require more bailouts at taxpayer expense.

The Fed and the FDIC: Banking Regulators

So the Dodd Frank Act required each of these large banks as well as a few other heavy hitters in the financial world to create a detailed plan describing what would happen to the company in the event of a complete collapse. That plan was to be filed with designated government regulators — the Federal Reserve and the Federal Deposit Insurance Corporation, better known as the FDIC.

The job of the Fed and the FDIC was to conduct periodic “stress tests” that would determine whether financial institutions were healthy. One job was to review these plans annually and notify their creators of any shortcomings. Banks were supposed to amend the plans to accommodate the Fed’s recommendations until the plan was deemed credible and viable.

And if they didn’t? The Dodd Frank Act also includes a mandate for regulators to seize and forcibly dismantle stubbornly non-compliant institutions and either kill them entirely or recreate them as smaller entities. This would prevent the need for massive and unpopular bailouts to keep those struggling, and shady, financial giants afloat.

Four years later, none of that has happened.

The Fed’s Standstill

The banks, chief among them the perennial banking bad boy Bank of America as well as its cohorts Chase and Citi, have filed living wills. They were followed by other big financial entities including Prudential and American International Group.

But the Fed and the FDIC have yet to respond. The whole topic became a sore point in recent US Senate Banking Committee hearings, when new Fed chair Janet Yellen blamed her agency’s foot-dragging on a complex documentation process and altogether avoided the question of the mandate to forcibly break up malfunctioning institutions.

The lack of response from the Fed on the entire “living will’ aspect of Dodd Frank worries a number of financial experts. They fear that even if the institutions comply with Dodd Frank and file plans as required, those plans are largely meaningless without timely feedback from the regulators.

What’s more, banking experts say, the reason the Fed is avoiding questions about the mandate to take charge of troubled institutions is that it doesn’t really have any plans of its own in place to address how to do that. If true, that means government regulators have no power to require banks to create credible plans and act on them if necessary.

This creates a situation, they say, that leaves the country vulnerable to another banking collapse like the one five years ago, with megabanks on the verge of collapse and a taxpayer funded bailout waiting in the wings because Dodd Frank’s provisions couldn’t be enforced.

For “taxpayer” read “you” – the ones already paying higher banking fees as large banks pass on their legal costs to customers.

Other provisions of the Dodd Frank act, such as requirements for tighter lending standards and consumer assistance, are in place, and the ultimate fate of the “living will” mandate remains to be seen. But as Jason Hartman says, education is a key part of investing success – and of financial survival in case of a bank’s demise.  (Top image: Flickr/eglobetravel)

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Who is the Fed and What Is It Doing With Your Money?

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Carla and the American Monetary Association Team


Who is the Fed and What Is It Doing With Your Money?

What does the Fed do?The Fed, aka the Federal Reserve, has been making more headlines since the housing collapse of a few years ago than at any time in its history, thanks largely to its ongoing but fading stimulus program aimed at keeping interest rates low. But the Fed does far more than that. Like a puppet master in the shadows pulling strings, the Federal Reserve makes decisions that affect the financial health of everybody in the US – and many abroad.

The nation’s central bank is tasked with regulating the flow of money throughout the economy. Its gatekeeper committees and subcommittees oversee everything from interest rates to inflation as it holds back or introduces money into the system.

That’s how the Fed gained its current level of consumer recognition. The housing bubble that peaked and then burst around 2008 had devastating ripple effects throughout the e3conmomuy as a whole. As homeowners across the country defaulted on mortgages and lost homes to foreclosure, the economy as a whole flattened.

So the Fed stepped in with a large-scale stimulus program known formally as Qualitative Easing version 3, a plan that involved the buying of billions of mortgage backed securities from the nation’s big banks each month. That. The Fed argued, would allow those banks to keep interest levels low and encourage the recovery of housing and other aspects of the economy.

But while the progress of the stimulus has gained the Fed some public scrutiny in recent months, it’s done little to lift the veil on the Fed’s relationship to those megabanks deemed too big to fail, the world’s money markets and you – yes, you, the American taxpayer.

The Fed and Interest Rates

The stimulus and its effect on interest rates touch everybody who’s looking to take out a loan, particularly for a home mortgage. Because QE3 was originally aimed at propping up the housing industry after the collapse, mortgage interest rates fell to historically low levels and have remained relatively low even as the Fed takes steps to taper down the stimulus thanks to improving job rates and consumer indexes.

Those low rates also trickle out into other kinds of loans as well, since the stimulus allows banks to adjust rates down on consumer credit purchases of items like cars and appliances too. But critics of the stimulus, some of whom are employees of regional branches of the Fed, point out that the nations large banks can still set their own rates and charge customers higher fees on transactions as well.

The Fed and Inflation

Probably nothing the Fed does has more of a direct effect on consumers than adjusting rates of inflation and deflation – the value of the dollar relative to its purchasing power. While it may seem that the best rate of inflation is no inflation at all, the Fed actually considers mild inflation to be completely acceptable. And it has the power to adjust those rates accordingly.

That’s not all bad, as Jason Hartman points out. As the value of the dollar goes down, so does the value of debt –meaning that a person with a home loan can end up paying less on that loan than its original value, since the dollar is worth less than it did when the loan was new.

The Fed and the Big Banks

Whether or not you hold an account with one of the country’s biggest banks, such as Citigroup, Bank of America, Wells Fargo or JP Morgan Chase, you’ve been affected by the malfeasance of those banks in the recent past. They’ve all been implicated in bad behavior stemming from the housing collapse that includes misrepresentation, fraud and outright criminal activity.

The Department of Justice, backed by the Fed, launched a number of investigations that led to multibillion-dollar fines and settlements on the part of Bank of America, Citgroup and Chase as well as a number of smaller satellite institutions. Victims in some pf the suits got settlements too.

But because a fine in the millions of dollars is mere pocket change to an institution that can’t be allowed to fail, those banks continue to operate, passing along the costs of those legal actions to customers in the form of fees and rates.

Those bad banking practices led to the creation of the Dodd frank Act in 2010 – a sweeping piece of consumer protection legislation aimed at protecting consumers and imposing tighter standards – and penalties – on the banks themselves.

Because of the Dodd Frank Act, the Fed now conducts annual “stress tests” – a review of a bank’s assets and outlay to determine its overall stability and health. The test allows the Fed to pinpoint problem areas and intervene before the bank is in danger of failing. Though the Fed’s stress tests are aimed at the bank itself, not consumers, the results are passed along in the form of customer service, accountability and even the opening and closing of bank branches in various parts of the country.

The Fed, LIBOR and International Currency Exchanges

Think that global money markets don’t affect the average American with o offshore assets? Think again. The Fed is active in the world’s currency exchanges too, with ties to the international banking rate setter LIBOR and others. Those rates set the value of the dollar relative to the currencies of other countries and the related interest rates. And that affects the rate and costs of importing and exporting goods as well as the exchange rates for currency conversion and other international financial activity. Whether you’re a tourist, entrepreneur or investor, the Fed’s behavior on the world scene affects your financial decisions.

The Fed isn’t omnipotent, though. Its recent actions – or inactions – about requiring banks to comply with stress test mandates recently came under sharp scrutiny by the Senate Banking committee. But its reach is long and its decisions small and large can affect the way we all conduct business both personal and pubic both at home and abroad.  (Top image: Flickr/anthonyquintano)

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