The Money Multiplier

This article shows a great graph representing the precipitious fall of the money multiplier. This is the true problem, since as the graph shows the money multiplier is under 1, meaning for everyone one dollar increase in checkable deposits, M1, a particular measure of money supply, only increases by a fraction of any deposit. 

This is clearly something that is plaguing our economy, and if banks were more willing to "create" money and loan out more money, banks would not only make much more money, helping their own cause, but also would help the economy move forward with increased Gross investment. 

Will the Deficit that the Obama Team Will incur be Too Large??

As the final days of Bush's presidency fade away, and the monumental inauguration of Barack Obama nears, there is, as expected, much talk about the coming stimulus package, and the deficit that will be incurred. As of now, a 1.2 trillion dollar deficit is expected to be incurred in the first year of Obama's presidency.

Will we be able to handle it, especially if this type of a deficit will continue for years to come? Well I mean with a nearly unlimited ability to issue treasury bonds, I think we will, however, that doesn't mean that we shouldn't try to curb our spending.

Undoubtedly, the federal government is bloated beyond reason, and it is quite clear that money hasn't been spent wisely. Obama must be more efficient with his Government expenditures in order to stop such waster from occurring. Furthermore, after we get through this recession, it is absolutely necessary that our country begins to tackle the debt that has been accumulated, which can only occur through a surplus. By applying the Laffer Curve, I unquestionably hold that we can maximize tax revenue, and aid the coming of such budget. 

For now, however, we must spend spend spend in order to pull the economy out of recession. 

2009 Won't Be Amazing, But it Will be Good

Flipping through WSJ as of late, I read an article about the desensitization of investors considering we have already heard so much unfavorable news, nothing short of Armageddon could take down the market as much as previous news has. This is great news for those looking to make a buck or two in the market this year, in fact I think there are more great investments out there than one might perceive. 

Considering Obama will be quick to implement a stimulus package as soon as he's sworn in, I firmly believe that those with the guts to buy the right stocks to profit off of such a package now will be rewarded. Alternative energy companies, retailer among other companies will all seeing improving bottomlines  due to an economic stimulus. Companies such as Best Buy, GAP and other retailers will definitely see improvement, and I think investing there right now is a great move. Additionally, a stimulus will positively affect Starbucks, despite it's recent downturn in sales and recent closing of store, and help it build back up, especially since they have begun to offer new tea drinks, and Starbucks Gold Membership cards, both of which will undoubtedly better performance.

As a slightly riskier bet, go with Bank of America. Hell, if they could survive this mess and acquire a few companies, those with guys will be rewarded for their audacity in purchasing BAC today. With new talent pouring in, and a slow, yet sure, rise in borrowing due to incredibly low interest rates, the company will outperform what most would expect. 

 

Lastly, I would like to apologize for a lack of posts over the Christmas/New Years Eve period of time. I consider that a vacation from everything, therefore I didn't post. This new year will involve many great posts to come about Business, Economics, and whatever else I may feel discussing.