EconomicCrisis.US

Paul Volcker, the White House economics adviser who crafted a proposed ban on proprietary trading by banks, said on Tuesday the practice was not central to the financial crisis — the very argument used by some critics of the proposal.

Volcker, however, still championed the ban — dubbed the “Volcker rule” when President Barack Obama unveiled it in January — and said commercial banks do not need speculative activities to make money.

Despite Volcker’s latest pitch for the proposal, it is unclear if it will survive the Congressional debate on how to overhaul the regulation of financial firms and markets.
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Whether the American economy is in an inflationary or deflationary environment sounds like it should be a fundamental and settled question. But due to the unprecedented financial crisis, the answer is actually subject to intense debate among economists.

Making economic projections is far from a scientific process, so it’s not surprising to find valid arguments on both sides of the divide. The economists who are right will help investors drive returns over the next three years.

Inflation can be a positive or negative, depending on the level and duration of it in our economy. The main negative associated with inflation is a drop in purchasing power of money, and therefore, consumers. In extreme cases, consumers may actually start hoarding if they fear continued and aggressive price increases. The positive side of inflation is to decrease the real value of debt, or essentially provide debt relief.
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So, the financial services industry says it wants to “earn back the trust of the American people.”

That must mean it’s loosening up loans to small businesses and investing money in communities hard hit by the nation’s jobs crisis, right?

Actually not. According to the Financial Services Roundtable, which represents the 150 largest banks and insurance companies, “earning back the trust of the American people” means spending millions of dollars on a public relations campaign to make Big Banks look warm and fuzzy.
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Chicago Federal Reserve Bank President Charles Evans Tuesday said that the United States is “slowly emerging” from a severe financial crisis and pointed to serious problems in commercial real estate.

Evans expressed “skepticism” about using monetary policy to counter asset price bubbles, but said that if the Fed loses its regulatory authority it may have no other choice but to use monetary policy.

Evans, in remarks prepared for the Institute of Regulation & Risk North Asia, in Hong Kong, did not have that much to say about the economy or current monetary policy issues, as he focused on how to avoid future financial crises.
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