Guest
07-30-2011, 12:37 AM
Everyone is watching their nest eggs held in stock fritter away as the partisan politicians in Washington appear to be purposely running our economy--and a huge amount of our wealth--off a cliff. They continue to cling to opposing ideologies, refusing to budge in negotiating a solution, even though they could. It's pretty clear than many of them don't really understand the havoc they are letting loose on the country. They seem only to be interested in the political outcome of their actions--will they be re-elected? Will their party remain in power?
But here's another little something to watch and worry about. All that money you have in money market mutual funds might not be as risk-free as you thought. You may not get all your money back.
Investors are already pulling billions of dollars from money funds, long seen as one of the safest places to park cash and a vital cog in the machine that provides short-term working capital financing for the U.S. economy. The funds are heavily exposed to U.S. Treasurys, and market observers said the threat of a default or downgrade to the U.S. credit rating is one reason investors are pulling out.
A run on these funds in 2008 was a major factor in the financial calamity that followed the collapse of Lehman Brothers, freezing up financing for companies, even the largest Fortune 500 firms. Back then the Treasury Department had to temporarily guarantee the funds and the Federal Reserve had to offer emergency loans to them to prevent investors from fleeing. With debt capped and government spending priorities definitely elsewhere, these funds and the U.S. economy may have to "go naked" in trying to self correct. If the Fed is unable--that is can't afford--to intervene, the economic eefect and the impact on our wealth and the U.S. economy truly could be the armageddon people have referred to.
If either a default or downgrade causes a decline in the value of both U.S. Treasury's and the dollar, there is little chance that the big money market funds will be able to meet the almost certain run that will result on the full redemption basis that most people expected when they invested in those funds. Once a run starts it will be difficult to counter without Fed intervention, which would be unlikely or impossible given the circumstances.
The irresponsible performance of the U.S. Congress will cost the American economy and American citizens a lot more of their wealth than the political ideologues have been arguing about in increased taxes and reduced spending. It will cost us all...a lot. The politicians have repeatedly talked about not doing anything to hurt the "job creators". But the result of their stubborn refusal to move off their partisan ideologies will cause far more economic damage. Why do you think that over 100 business groups, including the U.S. Chamber of Commerce, the American Manufactrers Association and the like have implored Congress to enact a solution? They know what is about to happen.
As I've said before, the market will make the adjustments as the result of reduced confidence and higher risk that our elected representatives refused to act upon, even though they could have. It will be very costly to all of us.
Watch.
But here's another little something to watch and worry about. All that money you have in money market mutual funds might not be as risk-free as you thought. You may not get all your money back.
Investors are already pulling billions of dollars from money funds, long seen as one of the safest places to park cash and a vital cog in the machine that provides short-term working capital financing for the U.S. economy. The funds are heavily exposed to U.S. Treasurys, and market observers said the threat of a default or downgrade to the U.S. credit rating is one reason investors are pulling out.
A run on these funds in 2008 was a major factor in the financial calamity that followed the collapse of Lehman Brothers, freezing up financing for companies, even the largest Fortune 500 firms. Back then the Treasury Department had to temporarily guarantee the funds and the Federal Reserve had to offer emergency loans to them to prevent investors from fleeing. With debt capped and government spending priorities definitely elsewhere, these funds and the U.S. economy may have to "go naked" in trying to self correct. If the Fed is unable--that is can't afford--to intervene, the economic eefect and the impact on our wealth and the U.S. economy truly could be the armageddon people have referred to.
If either a default or downgrade causes a decline in the value of both U.S. Treasury's and the dollar, there is little chance that the big money market funds will be able to meet the almost certain run that will result on the full redemption basis that most people expected when they invested in those funds. Once a run starts it will be difficult to counter without Fed intervention, which would be unlikely or impossible given the circumstances.
The irresponsible performance of the U.S. Congress will cost the American economy and American citizens a lot more of their wealth than the political ideologues have been arguing about in increased taxes and reduced spending. It will cost us all...a lot. The politicians have repeatedly talked about not doing anything to hurt the "job creators". But the result of their stubborn refusal to move off their partisan ideologies will cause far more economic damage. Why do you think that over 100 business groups, including the U.S. Chamber of Commerce, the American Manufactrers Association and the like have implored Congress to enact a solution? They know what is about to happen.
As I've said before, the market will make the adjustments as the result of reduced confidence and higher risk that our elected representatives refused to act upon, even though they could have. It will be very costly to all of us.
Watch.