Joe's Investo-Blog

To My Clients:

Our accounts are up 24.1 % for the year 2009.

Our accounts, together with the stock and bond markets, have performed quite well this past year despite large holdings in each account of low yielding T-bills and Treasury bonds. It is still quite difficult to find reasons not to continue our successful defensive strategies of the past three years in which we’ve been quite fortunate to obtain positive returns in each year.

The credit crisis is far from over, and although there are indications that the recession is coming to an end, it also appears that it will be a far from robust recovery. The best that can be said of the economy is that it has stopped declining. Employment continues to lag and will continue to be a severe drag on any recovery. In spite of the Federal Reserve’s efforts to stimulate monetary growth, it is not happening, as banks remain fearful of lending and continue to leave their reserves on deposit at the Fed. What little stimulus we are seeing seems to be finding its way into the financial markets so far, with little to show in the real economy.

The dollar has been declining for most of this past year with only recent signs of a turnaround. This has contributed to our Read more…

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Recently Sally Hutchins commented on a recent post as follows:

Please continue. So printing more money is creating more debt? Educate me. Love, Sally

Love? Yep. She’s my adorable sister.

Hi Sally:

Let me try to answer your question as succinctly as I can.

“Printing money” is a term used today that nobody really knows what it means. Historically it meant the government physically printed little pieces of paper which were then spent into circulation by buying goods and services the government needed. For example, in the Revolutionary War, the government printed continentals to pay the troops. Allegedly, British counterfieting rendered the currency eventually worthless. Again, when New York Bankers refused Abraham Lincoln additional financing during the Civil War, Lincoln then decided simply to print “greenbacks” to pay the troops. It worked. Merchants accepted greenbacks because Lincoln decreed that greenbacks would be accepted by the government for the payment of taxes. “Greenbacks” remained in circulation for decades and largely contributed to massive subsequent economic growth.

Today, 99 percent of all money in circulation isn’t currency at all, but mere electronic blips or signals recorded on the computerized ledgers of the banking system. Obviously actual printing of money doesn’t really happen anymore in any meaningful way. However, “money creation” is probably a more appropriate term. Money is created when a bank makes a loan. Presto. That’s it. I already know that you’re going to ask Read more…

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