From The Whittier Daily News: Richard C.K. Burdekin, a professor of economics at Claremont McKenna College, advises people to steer clear of the stock market's volatility and put their money in safer havens, such as inflation- linked bonds, otherwise known as index funds. "Technically, they're Treasury inflation-protected securities," he said. "The coupon payment is adjusted upward for inflation and the principal is also adjusted upward for inflation. You have protection against the main danger U.S. bonds would face." With all the financial upheaval that's occurred in recent days, some consumers might be tempted to pull money out of the bank and put it elsewhere - especially if their bank's stock is floundering. But Burdekin cautions against such knee-jerk reactions. "Assuming you have less than the maximum (amount of FDIC-insured funds), the only risk would be if the bank completely fails and there could be a delay in getting the money back," he said. "I wouldn't really think that it makes a lot of sense to move money around just because of the share price."
Wednesday, September 17, 2008
Claremont McKenna Professor on What To Do in this Economy
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2 comments:
This guy assumes the the FDIC will/can stay solvent.
Will Congress support an FDIC bailout by borrowing from the Treasury,printing more money, causing even more devaluation of the dollar? As it is we borrow constantly from Euro-Asian banks, thus our huge debt. When they see the dollar dip too far and cut us off, we're sunk. If a bank like Wells or B of A went down, the FDIC would wilt and we'd all lose. When will our professors stop spouting off about the $100K FDIC protection. Face it, it ain't really there anymore.
el Guapo
Saying inflation linked bonds "otherwise known as index funds" is very misleading, at least I understand it. Most index funds are stock market indices, not Treasury bonds. I'm sure the quote got mangled.
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