Conservative Economics

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Subject: money market funds

A Money Market Fund (or Money Market Mutual Fund) is an open ended mutual fund that invests in short term debt securities. Regulated under the Investment Company Act of 1940, Money Market funds are important providers of liquidity to financial intermediaries. In 1971, Bruce R. Bent established the first money market fund in the U.S. The Reserve Fund was offered to investors who were interested in preserving their cash and earning a small rate of return.
Outside of the U.S., the first money market fund was set up in 1968 and was designed for small investors. The fund was called Conta Garantia and was created by John Oswin Schroy. The fund’s investments included low denominations of commercial paper. (Wikipedia Jan 2010)

Deflation Economics

When cash is an investment strategy

Sometimes even cash is not a good idea. "Money to burn" showing Confederate Dollars.

Deflation is said to occur when general price levels fall. The last important example of general deflation in the United States occurred during the Great Depression. Federal Reserve officials and central bankers around the world often regard deflation as a greater risk than inflation. Under the Obama administration, US central bankers are now wary of both deflation and inflation.

Stagflation watch

When will inflation kick in?

Forecasting when inflation will kick in is impossible, because the political situation is so uncertain and conflicted.

The lack of fiscal restraint of President Obama on the healthcare issue, the ’stimulus bill’, and other ‘progressive’ legislation in the pipeline, combined with the jobs-firsts-inflation-last attitude of Fed Chairman Bernanke — leave little room to doubt that sooner or later the United States is likely to enter the realm of double-digit inflation.

Inflation is likely be the final and deadliest blow to the retirement dreams of many Baby Boomers. When the stock market crashes, one can hope for a recovery some day. With inflation, the losses are permanent and final.

Storm coming:

How to survive the coming inflation

Money as wallpaper. Germany 1923.

When the government spends much more than it takes in, inflation results. The Obama administration is spending a lot more that it should.

In fact, Congressional authorization for deficit spending is now at historic levels. Will Americans paper their walls with dollar bills when inflation hits?

So far, most Congressional authorizations have not been disbursed. But as spending budgets are executed, inflation should kick in.

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Featured articles on inside pages

Stock buybacks

WSJ exposes the 9/11 caper

In a major exposé of misused executive options, the Wall Street Journal ran a front page article, reporting that as stocks sank after the the 9/11 attacks, scores of companies rushed to issue options to top officials. Some executives reaped millions.
More ...

Securities Analysis

Does ‘SEC Total Return’ protect investors?

Millions of investors put money for retirement into mutual funds selected on the basis of "SEC total returns" and the name of the fund. This article explains how the SEC allows funds to use this misleading statistic to the detriment of investors and to the benefit of fund managers. More ...

US Politics

President Obama's Lincoln moment

In mid 2009, Barack Obama found that Lincoln's saying, "You can't fool all of the people all of the time," applied to his presidency. Profligate spending and unpopular health reform ended Obama's honeymoon. More ...

US equities

Sarbanes-Oxley and the shortage of equities

The Sarbanes-Oxley Act of 2002, by discouraging companies to go public, will exacerbate the shortage of equities, with a negative effect on the US stock market, although this was not the intent of its authors. Poorly drafted, ill-conceived, and unfair this law does little to protect investors.
More ...

US Bonds

Bond demand exceeds supply for a decade

Over the decade, 1995-2004, the demand for US bonds of all types has surpassed new bond issues in eight of the last ten years. This is the reason that bond prices have held firm, even in 2003, when net new issues reached almost $1.8 trillion. More ...

World Economy

What Is ‘International Liquidity’?

It used to be that the term 'international liquidity' meant the relative amount of resources available to a nation's monetary authorities that could be used to settle a balance of payments deficit. In the days of the gold standard, this would mean access to gold that could be used to redeem a nation's currency held by foreigners. More ...

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2010-08-13 12:55