Unwinding Government Stimulus – Good for Cash Investors?
Continuous improvement in the U.S. economy is now leading the government to explore the exit strategies that will eventually wean the economy from the multitude of support programs enacted during the worst of the credit crisis. In Federal Reserve Chairman Ben Bernanke’s recent Humphrey Hawkins testimony, the Chairman went to great lengths to assure the House Finance Committee that the significant stimulus that has been delivered by the Fed can and will be removed in an appropriate and timely manner. These exit strategies are necessary as the government’s stimulus may present inflation risks to the economy. Concerns over the government’s plans to exit these support programs are certainly valid; the repercussions of which will play an important role in the cash investing environment for treasurers over the next several years.
In many cases however, the timing and manner of exit from these support programs will not be solely up to the Fed. In fact, many of the support programs put in place are actually beginning to naturally expire as normal conditions return to the economy. One example is the money market fund insurance program set to expire in September of this year. This program will likely be replaced by a set of new proposed SEC regulations for the industry thus making future government support unnecessary. Also, many corporations that could once only issue debt under the Treasury’s Commercial Paper Funding Facility program are beginning to find buyers outside the program which is softening demand for the issuing “crutch” and will likely put an end to this program as well.
Since we are now in a bit of a holding pattern as the economy rebounds and the government programs begin to roll off, we thought it would be beneficial in this month’s Research Spotlight, to explore how the government may handle some of the support programs that were put in place during the worst of the 2008 crisis. We will continue to monitor market demand for these programs as many can affect strategy for cash investors in the near future.
Best Regards,
Ben Campbell
President & CEO
Please click here for disclosure information: Our research is for personal, non-commercial use only. You may not copy, distribute or modify content contained on this Website without prior written authorization from Capital Advisors Group. By viewing this Website and/or downloading its content, you agree to the Terms of Use & Privacy Policy.
