{"id":3878,"date":"2011-03-27T06:16:53","date_gmt":"2011-03-27T12:16:53","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=3878"},"modified":"2018-09-21T02:07:47","modified_gmt":"2018-09-21T06:07:47","slug":"government-support-of-economy-fading","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/03\/27\/government-support-of-economy-fading\/","title":{"rendered":"Government Support of Economy Fading"},"content":{"rendered":"<p><span style=\"font-size: 16px;\">During the onset of the Great Recession the Federal Government, along with the Federal Reserve, stepped into the U.S. economy to shore up its failing foundations.\u00a0 Now the end of that artificial support is being curtailed.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">I consider this to be a very good thing because, in my opinion, the Federal Reserve in particular has too much stimulus in the economy.\u00a0 &#8216;Too much stimulus&#8217; is another way of saying that there is too much money in the economy chasing too few goods.\u00a0 That is a prescription for inflation.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">Frankly, again in my opinion, it was the Fed&#8217;s easy money policy post the dot.com meltdown at the turn of the century that led to the real estate bubble.\u00a0 So I want for Federal Reserve stimulus to end post haste.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">Among the measures being enacted are:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">U.S. Treasury is giving permission to banks supported during the Great Recession to finally pay dividends to shareholders, or to increase extant dividends.\u00a0 Cash paid out to shareholders is paying out the equity portion of bank balance sheets.\u00a0 Too much debt to bad equity was what almost led to a collapse of the financial system.\u00a0 So cash was king for the last three years.\u00a0 That banks can now pay out cash as dividends means that the financial system is solvent.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Additionally, Treasury is allowing banks to borrow money in order to pay back the government (i.e. tax payers) monies lent to failing institutions during the crisis.\u00a0 By borrowing to pay down equity banks will become more leveraged and hence, more risky.\u00a0 This step is clearly a strong sign that the various institutions given permission to do this are strong financially.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">U.S. Treasury is also making plans to sell off some of the $142 billion portfolio of federal agency backed mortgages (i.e. <span style=\"text-decoration: underline;\"><a href=\"https:\/\/jasonapollovoss.com\/web2011\/02\/12\/what-my-intuition-tells-me-now-the-world-post-fannie-mae-and-freddie-mac-part-one\/\" target=\"_blank\" rel=\"noopener\">Fannie Mae<\/a><\/span> and <span style=\"text-decoration: underline;\"><a href=\"https:\/\/jasonapollovoss.com\/web2011\/02\/13\/what-my-intuition-tells-me-now-the-world-post-fannie-mae-and-freddie-mac-part-two\/\" target=\"_blank\" rel=\"noopener\">Freddie Mac<\/a><\/span>) it purchased at the height of the financial meltdown.\u00a0 By selling this portfolio the Treasury will be taking money out of the financial system &#8211; a good thing.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">The Federal Reserve is considering lowering the money supply by using reverse repurchase agreements.\u00a0 The specifics of this obscure financial instrument are not important.\u00a0 What is important is that the Fed feels that the economy is on sound enough footing to survive the draining away of some liquidity.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Additionally, the Federal Reserve purchased sub-prime mortgage securities from AIG during the Great Recession.\u00a0 It is making plans to sell those securities now.\u00a0 Again, when folks buy those securities it will take money out of the economy.\u00a0 A good thing.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">All in all, this is the beginning of the end of the government&#8217;s involvement in the U.S. economy made necessary by the Great Recession.\u00a0 This is important for two reasons.\u00a0 First, it signals that the economy is on sound footing; and second, it will drain away excess stimulus from the economy, thus taking away the element needed in order to create economic bubbles (amen!).<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>During the onset of the Great Recession the Federal Government, along with the Federal Reserve, stepped into the U.S. economy to shore up its failing foundations.\u00a0 Now the end of that artificial support is being curtailed. I consider this to be a very good thing because, in my opinion, the Federal Reserve in particular has [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-3878","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/3878","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=3878"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/3878\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=3878"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=3878"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=3878"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}