I want to tell you a story about an average American whose name is Fred*. Fred is an older guy, approaching retirement, who has spent his entire life working on his family farm in Nebraska.
He’s accumulated some wealth, although by the standards of the mega-wealthy it’s really a pittance, but he’s worked hard, lived frugally, and managed to accumulate some money. On top of that, Fred has been a smart, albeit conservative with the way he’s managed his personal finances, never borrowing a penny after he’d paid down all his debts at a surprisingly young age. Read more »
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Last week, the Federal Reserve announced it would begin buying “the long end of the yield curve”. What does this mean exactly?
On March 18, the Federal Reserve announced it would spend up to $1 trillion to buy treasury notes and mortgage securities. (Source: Bloomberg, March 19, 2009)
According to an article published yesterday on Bloomberg, the Federal Reserve will focus on buying US Treasuries with maturities of 2 to 10 years and spend up to $300 billion to do so over the next 6 months. In addition, the same article suggests the fed will also increase its buying of mortgage backed bonds issued by government backed entities like Fannie Mae and Freddie Mac from the current commitment of $500 billion (made last fall) to as much as $1.25 trillion.
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President Obama released his proposed budget recently and had his surrogates on the cable talk shows attempting to sell it to the American people. One recurring theme repeated over and over again by his pitchmen is that taxes will be raised only on the wealthy, those earning more than $250,000 per year. While I would argue tax increases of any kind are a bad idea given the state of the economy, I want to spend some time investigating the mammoth tax increase that’s hidden in the proposed budget for all Americans regardless of income level.
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