By Michael Lombardi, MBA | September 26, 2014
Six years ago this month, in the midst of the Great Recession, Lehman Brothers, one of the most well-known investment banks in the U.S. economy, filed for bankruptcy.
At the time, Lehman’s bankruptcy sparked widespread worries…and the U.S. financial system teetered on the verge of collapse. For those of us who remember that time, there was too much uncertainty.
So, the Federal Reserve and the government stepped in to help … Read More
By Michael Lombardi, MBA | August 18, 2014
The U.S. dollar is still regarded as the reserve currency of the world. The majority of international transactions are settled in U.S. dollars and most central banks around the word hold it in their foreign exchange reserves.
But since the Credit Crisis of 2008, and the multi-trillion-dollar printing program by the Federal Reserve, the supremacy of the U.S. dollar as the “world’s currency” has been challenged.
The BRICS countries (Brazil, … Read More
By Michael Lombardi, MBA | August 8, 2014
Remember Alan Greenspan? He was the chairman of the Federal Reserve from 1987 to 2006. Several media sources, including this one, blamed the sub-prime mortgage fiasco that led to the Credit Crisis of 2008 on the easy money policies under the leadership of Greenspan.
But the Credit Crisis aside, it is ironic but true that Greenspan has had a knack for calling stock market bubbles correctly.
For example, in December … Read More
By Michael Lombardi, MBA | July 30, 2014
My colleague Robert Appel (BA, BBL, LLB) issued a research paper to the subscribers of one of his financial advisories earlier this week. I thought it important that all my readers be aware of and understand the crux of what Robert is saying about our current economic situation and where it will eventually lead.
Here it is:
“The actions of the Federal Reserve (how far they went to ‘stabilize’ the … Read More
By Michael Lombardi, MBA | June 6, 2014
In 2012, I predicted that if the Federal Reserve couldn’t get the economy growing again, it would take interest rates into the negative zone.
Well, yesterday, the European Central Bank (ECB), the second-biggest central bank in the world, trumped the Fed and became the first major central bank to offer depositors negative interest rates.
What does “negative interest rates” mean?
Each night, major banks in the eurozone collectively deposit USD$1.0 … Read More
By Michael Lombardi, MBA | May 20, 2014
While the Federal Reserve has cut back on its money printing program, the fact of the matter is that the “official” U.S. national debt is closing in on $18.0 trillion. The unofficial national debt (when obligations like Social Security, Medicare, Medicaid, welfare, and now Obamacare are taken into consideration) is closer to $200 trillion.
The Japanese national debt just hit one quadrillion yuan.
Many countries in the eurozone are drowning … Read More
By Michael Lombardi, MBA | April 29, 2014
The housing market that lured institutional investors in during 2012 and 2013 is showing signs of cracking.
Before I go into more detail, you have to keep in mind that affordability is the key to the housing market and affordability for housing only increases once home buyers’ wages increase. Right now, incomes in the U.S. economy are declining. And you can add to the problem the fact that mortgage rates … Read More
By Michael Lombardi, MBA | April 10, 2014
In 2013, consumer spending accounted for 67% of U.S. gross domestic product. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 2, 2014.) It’s plain and simple: economic growth cannot be achieved unless consumers are spending.
And unfortunately, higher prices and lower discretionary spending are putting the brakes on consumer spending here in 2014.
The Motion Picture Association of America says box office sales in the U.S. … Read More
By Michael Lombardi, MBA | April 4, 2014
In the early days of the 2008 financial crisis, the Federal Reserve said, “Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment.” (Source: Federal Reserve, March 18, 2008.) As a result of this, the central bank came up with the idea of … Read More
By Michael Lombardi, MBA | March 31, 2014
For a moment, consider yourself a loan officer at a major bank. Would you approve a loan for a customer who says they earn $1,000 a month, spend $1,300 a month, and don’t have a job? They also tell you they have unpaid debts of $17,000.
I don’t think anyone would authorize that kind of loan because the chances of getting the money back are next to zero. The individual … Read More