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

Accelerating to a buyback-option blowout

By Q1 2006, stock buybacks had multiplied to five times the level of 2000. Buybacks grew by 25% in 2005, with corporate profits after taxes increasing only 5.5%. At these rates, buybacks will exceed after-tax profits by 2009.
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Securities Analysis

Is big bank complexity irreversible?

The root problem with big banks today is organizational and product line complexity. Excessive complexity in banks can be traced to the reorganization of Citibank in 1956, under Walter Wriston, following the advice of McKinsey and Company.
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US Politics

Why Congress won't kill ACORN

Closely connected with President Obama, the ACORN group of "community organizers" has drawn censure from the Democrat-controlled Congress as a result of investigative reporting by James O'Keefe and Hannah Giles. More ...

US equities

Stock values and cash dividends wither

Wall Street ballyhoo and flim-flam to the contrary, the year 2005 closed-out half a decade of misery and pain for the average investor in US equities. Average cash dividend yields never surpassed 3.8% during the period, and most of this was consumed by taxes and management expenses of the open-end mutual funds. More ...

US Bonds

The collapse of the dollar and US bonds?

The extreme spending of the Obama government, combined with irresponsible bank lending policies promoted by Barney Frank and Chris Dodd, portend rising interest rates, the collapse of the bond market, and the end of dollar supremacy. More ...

World Economy

Working off the US trade deficit

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the 'deficit' is in dollars, the US has no problem in 'paying it off'. More ...

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2010-11-05 15:03