The Fed and the credit crisis

For the last 50 years our nation has lived with the idea that our government can borrow as much as it wants and set its own rates through Fed Policy. I think the coming year will reveal a change that has already occurred. I think the Fed has less control over rates and the economy than is widely understood. The days of looking at the chairman of the Federal Reserve as the God of the Economy will be winding down.

In the days following the Indy Mac failure there was speculation about the possible need to nationalize Fannie Mae and Freddy Mac. There was therefore a new awareness of the potential impact of our governments “implied” guarantee of Fannie and Freddie’s debt. When you start to do the barn yard math on direct and indirect federal obligations it gets a little scary. We have about $5 Trillion dollars of direct debt. We have about $7MM of indirect debt through Fannie and Freddie. The FDIC insured deposits total over $5 Trillion. There are also a host of rather ill-defined unfunded liabilities.

I think we are going to go through a painful process of realizing we have limits to what we can borrow and guarantee. Investors will still like Treasuries, but they have lost a little of their luster in the worlds eyes. There are a lot of foreign investors holding treasuries with a value way under what they were purchased for. They have to be wondering both about further devaluation in the dollar against other currency and devaluation of the dollar through inflation.

Post a Comment

Your email is kept private. Required fields are marked *


Scam Awareness: How to Beat the Sweepstakes, Lottery and Prize Scam

Tuesday, March 21, 2017

You’ve won a new car or a dream vacation or cash—in a contest you never entered! This sounds too good to be true because it’s a scam. This con fools you into thinking you’ve won a prize or lottery jackpot, but you need to pay upfront fees to receive it. No matter how much you [...]

Financial Topics

Viewpoints - August 2017

Monday, July 24, 2017

Latest updates from our friends at Northern Trust. Viewpoints August, 2017


Business Pulse - Cybersecurity has emerged as a major issue for CEOs

Monday, July 27, 2015

CEOs Express Concern about the Cybersecurity of their Business. Read the full report here. Business Pulse – JUNE 2015 EXECUTIVE SUMMARY CYBERSECURITY  

Nicolet Bankshares, Inc. 2nd Quarter 2015 Earnings Release

Tuesday, July 21, 2015

Nicolet Bankshares, Inc. (OTCQB: NCBS) earnings release for 2nd quarter 2015. 2Q15 Earnings Release

How to Ensure a Good Credit Score

Wednesday, July 8, 2015

First, let’s understand how your credit score is determined. Your credit score is broken down into five categories weighted accordingly: Payment history = 35% Total amount owed = 30% Length of credit history = 15% New credit = 10% Type of credit in use = 10% MAKE YOUR PAYMENTS ON TIME. This is the most [...]


Font Size