Printing Money – What an Old Fashioned Concept
Creating Value is Better than Printing Money
I was reading the Wall Street Journal this morning. Yes that seems so odd I am even saying that. It’s not like it’s my daily habit to read the Wall Street Journal. I am stuck here in San Francisco – been trying to get to a family reunion for the holidays and have faced one weather delay after another. The WSJ was dropped off by my hotel room door. The Weekend Journal has a very interesting article on how the Fed is printing money like crazy – yet they aren’t even printing the money. It’s all just being created on the computer. They are “creating” the money through the same old scheme of loaning money based on the fractional reserve. BUT look at this paragraph from the WSJ article:
“In this crisis, the Fed’s assets have grown much faster than its capital. The truth is that the Federal Reserve is itself a highly leveraged financial institution. The flagship branch of the 12-bank system, the Federal Reserve Bank of New York, shows assets of $1.3 trillion and capital of just $12.2 billion. Its leverage ratio, a mere 0.9%, is less than one-third of that prescribed for banks in the private sector. Such a thin film of protection would present no special risk if the bank managed by Timothy F. Geithner, the Treasury secretary-designate, owned only short-dated Treasurys. However, the mystery meat acquired from Bear Stearns and AIG foots to $66.6 billion. A writedown of just 18.3% in the value of those risky portfolios would erase the New York Fed’s capital account. In congressional testimony eight years ago, Laurence Meyer, then a Fed governor, tried to allay any such concerns (which then must have seemed remote, indeed). “Creditors of central banks…are at no risk of a loss because the central bank can always create additional currency to meet any obligation denominated in that currency,” he soothingly reminded his listeners.”
Why would people experiencing unprecedented deflation be concerned about actions by our federal government that could create outrageous inflation? Mostly we should all be concerned about this because there is no way to predict the future as these are unprecedented times. All you can really do right now is be able to respond fast to emerging opportunities. Where can you turn for advice during a time like this when no one knows where things are heading? Here are some of my strategies to not just weather this fast changing situation, but to also capitalize on it:
1. Get really good at creating value for others, FAST. This is where project management comes in especially handy as the faster you can finish your projects, the more value you create.
2. Get very good at adapting fast to changing circumstances. This is where learning how to learn fast and also learning how to complete projects fast will stand you well during any time.
3. Create your own risk management plans. Look at the probability of various scenarios, and the impact of those occuring. Understand the expected monetary value of these scenarios and develop strategies that are appropriate for YOU. This is where the people who become certified Project Management Professionals through Cheetah Learning have an edge over others as these concepts are second nature to them.
December 20th, 2008 at 10:27 pm
[…] The flagship branch of the 12- bank system, the Federal Reserve Bank of New York, shows assets of $1.3 trillion and capital of just $12.2 billion. Its leverage ratio, a mere 0.9%, is less than one-third of that prescribed for banks in …[Continue Reading] […]