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- The Vulnerability of Private Wealth to Government Financial Stress
QEs, Currency Wars, the Trillion Dollar Platinum Coin and the Route to “Modern” Inflation
A government faced with financing its deficits in quantities some multiple of private saving must resort to monetary schemes in order to keep its promises to spend. Monetary schemes are essentially costless ways to pay the government’s bills today while … Continue reading →
About the Spellman ReportLew Spellman is a Professor of Finance at the University of Texas McCombs School of Business. The Spellman Report seeks to interpret current and future trends in the economy and financial markets from the perspective of history, theory, policy and market expectations.
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The antidote to a troubled macro environment since Keynes wrote the book in the 1930s Depression has been the dual demand-side sledgehammers of government deficit spending and monetary expansion. This has been Plan A to address a beleaguered economy and other things needing fixes. Having not worked miracles, governments at all levels across the globe are on to Plan B. Continue reading
Bonds are fun to own when interest rates are very high and then bond prices start to rise. That makes for favorable income and capital gains simultaneously. Such was the opportunity bond investors in U.S. markets enjoyed commencing in 1981 …and then for three following decades. It was bond market Nirvana, which unfortunately for bond investors is fading into the rear view mirror. Continue reading
The economy has been in a growth rut for six years with one large shock after another. But there is also a cyclical component to GDP growth that lives a life of its own and can drive an economy. The very low levels of plant and equipment spending since the tech boom of the 1990s leaves the US with aging physical plant and rising labor costs. This should stimulate business capital investment and keep the cyclical ball rolling but at reduced profit margins and a tinge of inflationary pressure. Continue reading
Though financial regulation has taken the friendly local loan officer (George Bailey) out of the credit equation, the Fed’s Quantitative Ease is creating credit at close to record rates of growth. The credit generation is not in the usual ways, but in amounts sufficient to generate an economic expansion. Read about the creative market response to increases in the monetary base when banks are handcuffed to Dodd-Frank. Continue reading
What is a government to do, when a slowdown in population growth occurs after it has committed itself to age related entitlements? In this case, inter-generational income redistribution from the young to the elderly will not be sufficient to cover the costs. The answer is to find another tax base, which this time looks to be a wealth tax. Indeed, it has already arrived. Learn more about financial diversification consistent with this reality. Continue reading
Many Americans have a sense that the financial distress of the US government is no longer an issue to be thought about later. We have brought together for one evening experts from law, global investment and financial planning who can provide you with important background to implement your own wealth preservation plan. To learn more and reserve your seat now for this important event, click here.
At the end of World War II, lore has it that Harry Truman’s economists facing a wide range of possible economic outcomes advised him that “on one hand this, and on the other hand that”. Truman eventually had enough of the uncertainty and asked for a “one-armed economist”. Much is the same today with mega forces pushing and pulling the economy. The net balance will determine whether it is to be a No Mo or Might Mo economy. Continue reading
This week, President Obama unveiled his proposals to enhance economic growth, create quality jobs, and create fairness in income distribution an approach he calls growing from the “middle out.” His plans call for income redistribution under the guise of income “fairness” that might reduce differences in income but at a cost of lower income for all. These lessons of the “isms” were learned centuries ago and relearned after the Great Depression but seemly must be relearned again. This will be an expensive education of a President. Continue reading
Federal Reserve metaphors of tapering, exit and de-acceleration are but face saving diversions in the dialogue from the hard fact that this is a requiem not just for QE3 but also a requiem for the idea that the Fed is able to generate further lending and spending. In this new global financing world, stimulus from money had moved to the Shadow Banking System which has reached its upper limit not despite QE3 but because of it. Continue reading