Fwd: Monetary Policy Won't Fix the Economy

Why am I posting this? 

What is the significance of this post to entrepreneurship, to strategic thinking.?

Why this financial debacle take place in the US?

If were the President of USA, how could you have prevented this?

From: American Breaking Point <Service@americanbreakingpoint.com>
Date: Tue, Jun 26, 2012 at 4:20 AM
Subject: Monetary Policy Won't Fix the Economy

EMAIL ALERT: June 25, 2012 HOME ABOUT Voters Doubt Presidential Power Over Economy June 25, 2012 As the presidential race ramps up to full campaign frenzy, Obama and Romney are touting their plans to jump-start the stalled U.S. economy – while denouncing each other at the same time. Read more… The Continuing Economic Crisis June 22, 2012 Obama has been rightfully criticized for saying that 'the private sector is doing fine.' This indicates he has no understanding of the country's economic problems and no idea how to solve them. Read more… Federal Agencies Monitoring Employees' E-mail June 21, 2012 The Obama administration warned federal agencies that monitoring their employees' personal e-mail communications could violate the law if the intent is to retaliate against whistleblowers. Read more… Romney Emphatic About Rubio Having a Spot on VP Short List June 20, 2012 GOP presidential nominee Mitt Romney called reports that he is not considering Florida Senator Marco Rubio as a potential running mate 'entirely false.' Read more… Monetary Policy Will Not Stimulate the Economy By Joe Cobb The Federal Reserve has created billions of dollars in new bank reserves over the past two years, mostly as part of its bailout of the banks that were exposed to default on mortgage bonds issued by Fannie and Freddie. Those unsound, even toxic bonds threatened to bring down the international banking system because banks depend on the ability to sell their assets if depositors and creditors demand withdrawals. A bank is just a big "balance sheet." It has assets on one side supporting (balancing) the liabilities it owes to depositors and creditors. If the asset side drops in value, the bank becomes insolvent, just the same as if it had overextended itself by issuing too many liabilities. Homeowners who invested in big houses, which declined in market value when the housing bubble popped, face a similar problem. The homeowner might still be able to pay the mortgage, but the house is "upside down."  The homeowner cannot sell it or even refinance it. Many homeowners who wanted their home to be an investment that goes up in value decided to walk away instead to paying the mortgage, even though paying was possible. Not all the bonds and mortgages held by the banks were bad assets. But some were bad and potential buyers did not know which ones. If a bank wanted to sell a good bond it held among its assets to get cash to pay a creditor, it had to depend on someone else willing to buy the bond. When the bond market freezes up, because nobody knows whether particular bonds are good or bad, even the good bonds lose value; they can only be sold at a deep discount. The Toxic Asset Relief Program (TARP) was supposed to be a switch-out program for bad bonds, similar to the Savings and Loan relief program in the 1980s. The federal government became the owner of over $150 billion in commercial real estate when insolvent S&Ls were closed. The government held the real estate in a trust fund, and within 10 years the real estate had all been resold to investors and the federal government made a profit. Regardless of whether anyone should be bailed out, the idea was to have a temporary program to provide repayments to investors who had put up the money before the collapse. In the S&L bailout, the investors were considered to be "little people" covered by deposit insurance. In the TARP bailout, the investors were the biggest and wealthiest financiers. But the Bush-Obama bailout was sold on the claim that those banks were too big to fail because smaller banks and families depended on the smooth functioning of the payments system. Whether that claim was true, or just special interest pleading by rich insiders, will have to wait for historians in the future. Click here to continue reading… ARCHIVE Freedom & Prosperity Letter Free Reports Partner With Us Contact Us To prevent your American Breaking Point email updates from getting swept up by an overzealous spam filter, please add our "from" address (Service@americanbreakingpoint.com) to your address book. If your email address has changed, please tell us by going here now: http://investorplace.com/ipi/e/. Or if you would rather not receive email updates from American Breaking Point, you can let us know by visiting http://u.investorplace.com/u/cgfp/index.html We will honor your request in 7-10 days © 2012 InvestorPlace.com Presented by InvestorPlace Media, LLC 700 Indian Springs Drive, Lancaster, PA 17601 ABP20120625A