Monetary Theory and Investments
50 Years Historical Financial and Economic Data in One Spreadsheet with Illustrative Commentary
(click on the image to view the spreadsheet in full size) The purpose of this exercise initially was to help put into context the data and assumptions we, as financial planning practitioners use, such as assumed tax rates, interest rates and inflation when we are building financial plans. How do they compare to the past?…
Read MoreTaxation- is for Fiscal/ Monetary and Social Policy. Not Revenue.
During the peak of the Financial Crisis in 2008 the Federal Reserve embarked on a program called Quantitative Easing. At the time it was called the “nuclear option.” Under this plan the Federal reserve purchases assets that are falling in price or have few if any bidders. This gives the sellers (generally banks) cash in exchange for an…
Read MoreWhy the Fed’s Monetary Expansion hasn’t caused excessive inflation
Expanding the monetary base can and has caused significant inflation historically.The truth is that credit long ago became a larger factor in inflation than did actual money in circulation. While the monetary base has expanded, credit has contracted. So much so that the fed’s massive QE programs have effectively offset the loss of credit banks…
Read MoreThe Potential Impact of Rising Interest Rates on the Equity Risk Premium
This is a brief article on the impact of Monetary policy on treasury interest rates, which impact equity market valuations through the Equity risk premium.. The New York Federal Reserve released an article by Fernando Duarte and Carlo Rosa May 22, 2013 titled “Are Stocks Cheap a Review of the Evidence” supporting the notion that the low-interest rate environment, caused by the…
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