Creation of Wheelbarrow Money

Wheelbarrow money isn’t just a figment of the past or in the annals of German history. It is real and today, just not in the United States. On the other hand, the little nation of Zimbabwe is reorganizing its money in an attempt to meet its outrageous 2,200,000% inflation rate. Obviously, the crazy percentage relates to older and better times.

Last week Zimbabwe released $100 billion notes in a meager attempt to fight the inflationary wheelbarrow syndrome. The day the new banknote hit the streets wasn’t enough to buy a loaf of bread. Today, the new bank note won’t cover that. Inflation has already eroded the value. Now a loaf of bread is $200 billion and if a Zimbabwe citizens longs for a can of Coke, that is a mere $600 billion. Zimbabwe is cutting ten zeros from its currency making $10 billion a revalued one dollar. In headier times, Zimbabwe was the toast of the third-world town.

The problem isn’t over. Inflation is so rampant, monetary units are expected to change again in the near future. Interestingly, just six months ago, this writer heard comparisons of Zimbabwe’s central banking policy to Ben Bernanke’s Federal Reserve of U.S. origin. Naturally, there are plenty of differences, notably that Zimbabwe is certainly not America. The overspending habits, however, are very much alike.

What the pundits say, there are similarities and the fact remains that no single economy is immune from inflation, especially when money policy and overspending is largely ignored. Could it be possible that a wheelbarrow of dollars could be required to buy a loaf of bread? It happened in Germany and if we keep ignoring common sense, nothing is impossible. Taking wealth for granted through fraudulent spending is a dangerous policy.

Debt, like the U.S. national debt, doesn’t go away, unless of course, the United Nations collects donations from larger economies to make that happen. Strangely, while this plan is part of U.N. policy creativity and wishful thinking, the reality is another thing altogether. Whether wealth redistribution plans of the U.N. actually work in 2015 or in 2030, U.N. plans aren’t really about building local economies, but about global empowerment. It isn’t happening for Zimbabwe and the outlook isn’t good for the U.S. either where runaway spending is concerned. Bailing out the world and supporting global governance is part of the reason why the United States national debt is where it is today.

Remember that the current nation of Zimbabwe isn’t promised tomorrow. The United States shouldn’t take the future for granted either. ~ E. Manning

Federal Reserve Installs More Confidence

Rhetoric aside, tough times are clearly ahead in the eyes of the U.S. Federal Reserve system. Not one to be outdone, the Fed has moved to expand and strengthen confidence in the U.S. financial system.

The Fed is adopting longer terms for banking institution loans through its lending provisions. Since other central banks are involved in the economic bailout, the European Central Bank and the Swiss National Bank are “adapting the maturity of their operations” as well.

In the words of the Federal Reserve, “continued fragile circumstances in financial markets” continue to exist. Federal Reserve provisions would be withdrawn should the FOMC Board decide that “conditions in financial markets are no longer unusual and exigent.”

Provisions include:
1. Extension of the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) through January 30, 2009.
2. The introduction of auctions of options on $50 billion of draws on the TSLF.
3. The introduction of 84-day Term Auction Facility (TAF) loans as a complement to 28-day TAF loans.
4. An increase in the Federal Reserve’s swap line with the European Central Bank to $55 billion from $50 billion.

~ E. Manning

Foreclosure: Minefield of Saving Your Skin

The provisions touted by government lawmakers is projected to be a real help for honest home buyers throughout the United States. Clearly, the rules do not assist speculators or business investors. Still, the “home buyer bailout” may not help as many American citizens or prevent as many foreclosures as government authorities claim.

Qualified borrowers must live in their homes with loans issued between January 2005 and June 2007, while spending at least 31% of their gross monthly income on mortgage debt. If you qualify on these standards, you can note two check marks.

Further, home buyers must prove that they cannot or will not be able to keep paying their existing mortgage while signify that they are not deliberately defaulting on their home loan to obtain lower payments. Whether a home buyer is in a current state of default doesn’t matter. Proving circumstances does. If you qualify on these standards, you can note another two check marks.

Home equity lines of credit must be retired. If you qualify, make another check mark.

Total loan debt cannot exceed

Banking & Lending Standards Threaten Economy

Pollster financial consulting firm Deloitte LLP has discovered that two out of three Americans have finally decided that getting a mortgage is more difficult. This fact creates quite a conundrum for financial authorities that want easy answers. Henry Paulson, U.S. Treasury Secretary correctly believes that without mortgages, there is essentially not a housing market. Paulson wants to jump start the ailing economy through the devastated U.S. housing market. That is why Paulson is so adamant about protecting mortgage cousins, Fannie Mae and Freddie Mac at all costs. They currently guarantee roughly 80% of U.S. mortgages and secure the future in the eyes of conventional wisdom.

In fact, without Fannie and Freddie, the U.S. government has little chance at stopping the bleeding in the mortgage and financial markets unless authorities were to reinvent the wheel. Unfortunately for the economy, bankers are no longer free-wheeling loans, making it tougher all the way around for good customers to buy a home. Why? Bankers are playing by the rules or “stricter standards”, which threatens to upend the entire economic recovery plan by the Treasury and Federal Reserve.

Now that the party is over, bankers are typically demanding a

Expanding Inflation Risks U.S. Economy

The debate has been on since the United States has seen an alarming increase in the costs of essentials across the board. For years, the Federal Reserve has ignored the impact of energy and food prices in its computations for inflation. As a result of recent events, the Fed has been forced to retool its thinking, even though the Fed body of thought insists on using the same computations.

The Fed remains skeptical that high commodity prices will ripple through the economy, leading to broad price hikes and big wage increases. Why the Fed assumes that wage increases are even in the cards is beyond most economist thinking. The fact is that the United States is in the midst or very close to what the Federal Reserve and economists hate the most: the evil of stagflation. There won’t be appreciable increases in income, only hikes in cost, loss of jobs and the devaluation of the monetary system.

The myth is that the Federal Reserve can control

More U.S. Banks Close Amid Pain

Friday at the last moment seems to be an FDIC favorite process for dealing with bankrupt financial and banking institutions. The Federal Reserve filed an order for First National Holding Company of Scottsdale, Arizona to cease and desist their actions, while providing certain documentation to the Federal Reserve Board.

The FDIC closed First National Bank of Nevada and First Heritage Bank. The FDIC moved quickly before the situation at the banks became worse, stating that the takeover of the failed banks was the least costly resolution and all depositors, including those with funds in excess of FDIC insurance limits, will switch to Mutual of Omaha with “the full amount of their deposits.” The FDIC has made certain that account holders have full access to their funds with the ability to write checks and make ATM transactions.

Local authorities have warned against the “need” for a bank run as

EU Wants Tighter Controls on Securitized Loans

The European Union has looked long and hard at the mortgage debacle in the United States and is planning to take regulatory action at home. Bankers have proved that they cannot be entirely trusted where profits and internal banking instruments are concerned. The European Commission is on top of the matter to avoid a management crisis by EU banking bodies. Naturally, bankers are concerned with their profit margins more than safety or the possibility of fraud.

The EU wants to allow banks to buy so-called securitized loans, loans repackaged as securities, if the selling institution holds back 10 percent in reserves, says a European Union Commission draft for new banking rules. The intent is to implement the rules in the autumn. EU governments and the European Parliament have not approved the plan.

The plan has alarmed the financial industry. The industry claims that the ruling could restrict lending in Europe by driving up the price of loans for companies, home buyers and consumers. Banks think that Europe’s banking and financial market is at risk of becoming overregulated. Clearly, the EU knows that commercial bankers have their brains in their wallets.

Banks are also worried about EU plans to limit the size of loans for interbank lending. The draft plan requires banks to commit no more than a quarter of equity capital for interbank loans. Bankers fear that such a move would lead to new liquidity shortages in interbank dealings.