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Why Fed Policies and Treasury Department Bailouts Will Lead to Inflation Rather Than Deflation
The U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) both fell in October. Those declines – combined with sharp downward spirals in worldwide stock and commodity prices – have caused many analysts, and even central bankers, to worry that we are on the brink of deflation.
Such concerns may be warranted in the short-term. But in the long run, deflation won’t be the challenge we face.
Thanks to an overly aggressive central bank, and more than $1.5 trillion in U.S. Treasury Department bailout programs – as well as other factors related to the ongoing global financial crisis – inflation…
3Dec2008 | Money Morning | 0 comments | ContinuedRising Tide of Level 3 Assets a “Disaster Waiting to Happenâ€
In the first quarter, Goldman Sachs Group Inc. (GS) packed another $27 billion worth of illiquid assets onto its balance sheet – a 39% increase that brought the total to $96 billion.
And Goldman wasn’t alone. Morgan Stanley (MS) reported that these hard-to-value/hard-to-sell assets soared 45%, reaching $32 billion. For Lehman Brothers Holdings Inc. (LEH), the first-quarter increase was $500 million, bringing its total to $42.5 billion.
The balance-sheet holdings in question are known as “Level 3″ assets. And with the smoke from the subprime-mortgage crisis still hanging over Wall Street like the fallout from a nuclear missile strike, some industry observers…
21Apr2008 | Money Morning | Comments Off | Continued
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