Category Archives for "Opinion"

How Wall Street Ruined Main Street

Wall Street’s Stranglehold on the Economy Is Choking Americans

America’s Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.

And yet today, 234 years later, our Founding Fathers’ worst fears have come true. Wall Street’s stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.

It’s high time we address the truth about Wall Street’s tyranny and set a course for a more secure economic future – one that’s anchored by a safe banking system, not a system rigged by banks.

This is a good article that delves into the banking and financial system crisis a little deeper than most I’ve seen. It’s a bitingly sarcastic look at what has happened over the past decade (or so).

New Money Hacks Store

I just added a new store to the Money Hacks site. I know, I'm a little late to the party, but that's my MO! 🙂

It's hosted by Amazon and it's filled with hundreds of personal finance books from authors like Jim Cramer, Andrew Tobias, George Soros, Peter Lynch, and Jim Rogers.

Check it out. There's still time to order before Christmas (I can say that, right)!

JP Morgan Chase Up on Earnings Report

Banks, insurers head higher – MarketWatch

A quartet of top U.S. bank stocks rose on Wednesday after J.P. Morgan Chase & Co. reported earnings that surpassed Wall Street estimates, and the insurance sector also weighed in with gains to lift financial stocks more than 2%.

I suggest that the management at JPM horde all that cash, as the next big mortgage resets occur in 2012 (5 years after the peak of 2007, when everybody and their mother, dog, parakeet, and gerbil bought houses with no money down, poor credit, and insufficient income).

Now that many of those same people are now either unemployed or still making less money than their mortgage payment, the pressure is going to be HUGE on the housing market, banking sector, and overall economy. Let’s hope the news that the economy and employment pictures are improving, else we fall into a really nasty tailspin. Let’s also hope I’m wrong about the resets (here’s the good personal news: my mortgage from 2004 reset at a lower interest rate).

Is Alan Greenspan to Blame for the Current Economic Crisis?

To the creator of PennyJobs, Curtis, the answer — clearly — is an emphatic YES!!!

What About Greedy Bankers?

Some like to point out that Wall Street creating the easy home securities like ARM and sub-prime loans, but realize that Wall Street would not have been able to create these things if Alan wouldn’t have allowed interest rates to drop well below market rates.

Its Official, Alan Greenspan Is To Blame | PennyJobs

Not sure I agree with the statement (it seems like a circular argument), but I, too, place a lot of blame on Greenspan and the Federal Reserve. And my opinion isn’t influenced, in this case, by the fact that I think the Fed does too much. It’s based on the idea that one of the, if not THE, central functions of the Federal Reserve is to regulate banks and other financial institutions.

The Fed failed in its oversight of the banks; in fact, they encouraged risky behavior. I think they were of the mind that all of these “derivatives” were reducing — if not eliminating — the risk naturally inherent in risk-based securities. After all, mortgages, for example, have inherent risks and their priced almost solely according to this risk (in the form of the interest rate).

A simple economic lesson: Higher interest rate = Higher perceived risk

As interest rates dropped to historically low numbers, the market clearly perceived lower risk. But people still lose jobs, hurricanes still happen, blight still occurs.

As the bubble inflated, more and more people pumped more and more air into it. As a bubble expands, it becomes more likely to burst.

And BURST it did.

It would be interesting to know what the money multiplier was during the early 2000s versus other 5- or 10-year periods. I would guess that it was rather high.

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Wealth-Building Wednesday — July 8, 2009

This is the “Dog Ate My Homework” edition 🙂

I’ve been burning the candle at both ends lately, what with my job winding down (amazingly, it winds up before it winds down, having to train my replacements), a big vacation planned for August (while I still have money, a car, and a house — hehe), and 2 kids that are growing up way too fast…

So, like any good student (of life), when the chips are down, you missed your assignment, you’re in danger of failing an exam —

You CHEAT

Actually, this week, I’m taking a pass. We’ve been talking about how to build wealth, how to brainstorm business ideas, and how to get started.

We’ll pick up on that next time around.

This week, I want to direct you to a post that one of my fellow Personal Finance bloggers, Lazy Man, wrote, entitled, “Wealth Creation: Is it a Myth?

He postulates that wealth creation is a zero-sum game: Any time I make a dollar, somebody loses a dollar; thus, it’s a zero-sum game.

It’s an interesting concept. His post got a lot of people talking. Make sure you read the Comments for my take on the question, where I give the “functional” reason that wealth-creation is NOT a zero-sum game (Lazy Man mentioned it briefly in his post) — but absent banks, there may in fact be no wealth creation.

Check it out. Tell me what you think in the comments here.