By Rex Johnson
I have been telling credit unions that it’s time to start taking more risk for the last six years. It wasn’t a fashionable message in 2007-2008 and it still isn’t today. But that trend is beginning to turn around and guess who’s behind it? It’s gathering a lot of momentum thanks to President Obama, the U.S. Federal Reserve and the NCUA. Why? Because everyone is beginning to understand that the only way to jump-start this economy is by creating jobs, and that will not happen unless everyone starts spending money.
Money, Money Everywhere
The U.S. Central Bank started to make money available beginning in November 2008. Here’s what they did:
- They went through three rounds of bond buying
- They cut short term interest rates
- They brought interest rates down to practically zero
- They injected a trillion dollars into the financial system
The Fed received worldwide support, from Tokyo to Frankfurt to London, in their push to make more currency available and soon presses were working overtime: money was being printed everywhere.
Their economy-building plan was based on a simple theory: We stimulate the economy anytime we spend money and that means more jobs are created whenever Americans accelerate spending. In fact, consumer spending accounts for anywhere between 40-70 percent of GDP, depending on how it’s measured. That’s a lot of stimulus.