Treasury Bills “crack the floor” and deflation becomes a greater risk.

US Treasuries rose again yesterday, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression. The panic that has gripped Wall Street continues as investors shun almost all investments except US government paper - both domestically and internationally.

Now, I’m genuinely worried… friends.

Irving Fisher argued that the predominant factor leading to the Great Depression was overindebtedness and deflation. Fisher argued that loose credit (low interest credit without close ties to risk) lead to over-indebtedness, which fueled speculation and asset bubbles.

… sound familiar?

Encouraging the Freedom to Fail

American business is the most robust, the most efficient, and the most effective in providing returns to shareholders on invested capital. We take capital from all points on the globe and turn it into returns that are often multiples of what they initially invested. No other country is as effective at generating wealth as the United States. We are so effective because of our commitment to capitalism and free markets. Part and parcel of that commitment is a belief in freedom. One of those freedoms has to be the freedom to fail. For if failure is not a consequence of bad decision making by private enterprise, we will surely fail in the long term in generating wealth. Life without risk, in business, is not worth investing in.

Stock Market Meltdown, Bank Failures, and Recession! Oh my!

Last week, the stock market shredded almost 20% of its value, and briefly looked as if the Dow Jones Industrial Average would march to 7000, a number that would bring the market’s value down to almost 50% from its high a year ago. Panicked investors continue to be frenzied as they worry about the value of their 401K’s, IRA’s, and government savings plans, selling in droves and fleeing for the safety of US Treasury Bonds; bonds which are almost worthless in their yields at the moment as demand for bonds far outstrips supply. In the time of market panic - cash is king. Many Americans are asking, however, why this is happening? They were told the Bail Out “rescue” plan would avoid Financial Armageddon! Why then does the market continue to be driven downward, and the credit market continue to be seized?

Why the Fed saved AIG and not Lehman

(Washington, D.C. ; Right Commentary) The U.S. Federal Reserve Board reversed course Tuesday night and agreed to an $85 billion bailout of global insurer American International Group (AIG), giving the U.S. government an ownership stake in the troubled insurance giant.
Treasury Secretary Henry Paulson Jr. and the Federal Reserve Chairman, Ben Bernanke convened a meeting with [...]