Nobel Prize winning economist Joseph Stiglitz explores the current financial system and the damage done to the economy due to that system. As he states in the video the credit crisis is not something that happened to the financial institutions. The credit crisis caused recession is something the financial sector did to us.
He covers the topics he discusses in the video in his new book: Freefall
Related: There is No Invisible Hand – Failure to Regulate Financial Markets Leads to Predictable Consequences – Market Inefficiencies and Efficient Market Theory – Congress Eases Bank Laws (1999) – Volcker on the Great Recession and Need for Reform
Yields are staying amazingly low today. Due to the credit crisis the federal reserve is shifting hundreds of billions of dollars from savers to bankers to allow banks to make up for losses they experienced (both in losses on bad loans and huge cash payments made to hundreds of executives over more than a decade). For that reason (and others) yields are extremely low now which is a great burden on those that saved and counted on reasonable investment yield.
Don’t be fooled by apologist for those causing the credit crisis that try and excuse their behavior and act as those paying back the bailout payments means they paid back the favors they were given. They have received much more from the policies of the federal reserve that has taken hundreds of billions of dollars from savers and given it to bankers. It has the same effect as a direct tax on savers being paid to bankers.
What is an investor/saver to do? James Jubak provides some excellent advice.
How to maximize what your cash pays even when nothing is paying much of anything now
You could lock your money up for decades and get 4.56% in a 30-year Treasury bond but 30 years is forever. And besides interest rates have to go up from today’s lows and that means bond prices will be coming down, probably fast enough to eat up all the interest that bond pays and more.
…
Not if you remember that interest rates are going up in most of the world (except maybe Europe and Japan) quite dramatically over the next 12 months. A year from now, perhaps sooner, you’ll be able to get yields swell north of anything you can find now.
That pretty much means that you’re guaranteed to lose money two ways by locking it up for the long term now.
…
For the short term you need to put your cash into something that’s as safe as possible but that offers you as much income as possible—and that doesn’t lock up your money for very long.
My choice dividend paying stocks—if they pay a high dividend, are extremely liquid, and are battle tested.
Whether you agree with his suggestions in the article is up to you. But even if you don’t he provides a very good overview of the options and risks that you have to navigate now as an investor seeking investments that provide a decent yield. I agree with him that interest rates seem likely to rise, making bonds an investment I largely avoid now myself.
Related: posts on financial literacy – Jubak Picks 10 Stocks for Income Investors – S&P 500 Dividend Yield Tops Bond Yield: First Time Since 1958 – Bond Yields Show Dramatic Increase in Investor Confidence
The slow recovery from the massive credit crisis caused recession remains underway. Nonfarm payroll employment declined 36,000 in February, and the unemployment rate held at 9.7%, the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and information, while temporary help services added jobs. Severe winter weather in parts of the country may have affected, negatively, payroll employment and hours.
In February, the number of unemployed persons, at 14.9 million, was essentially unchanged. Among the major worker groups, the unemployment rates for adult men (10.0%), adult women (8.0%), whites (8.8%), African-Americans (15.8%), Hispanics (12.4%), Asians was 8.4%, and teenagers (25.0%) showed little to no change in February.
The number of long-term unemployed (those jobless for 27 weeks and over) was 6.1 million in February and has remained stable since December. About 4 in 10 unemployed persons have been unemployed for 27 weeks or more.
In February, the civilian labor force participation rate (64.8%) and the employment-population ratio (58.5%) were little changed.
The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) increased from 8.3 to 8.8 million in February, partially offsetting a large decrease in the prior month. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
Since the start of the recession in December 2007, payroll employment has fallen by 8.4 million.
Related: Unemployment Rate Reached 10.2% – Another 450,000 Jobs Lost in June 2009 – Can unemployment claims predict the end of the American recession?
Read more