REI Wealth Monthly Issue 09 | Page 35

THE CREDIT CRISIS: INVESTMENTS ON A TIGHTROPE WITH LESS SAFETY NETS RICK TOBIN The near implosion of the world’s financial system back during the week of September 29th, 2008, as I had forecast about six (6) months in advance for a variety of reasons, significantly changed the way we live in our world today. The figurative financial “tightrope” that most Americans walk on each day became a bit more challenging partly due to less perceived “safety nets” to better protect and to save us. Prior to the near collapse of the highly leveraged financial markets, partly due to the alleged $1,500 trillion of primarily unregulated derivatives (i.e., Credit Default Swaps, Interest Rate Options, etc.), individuals or investment groups supposedly determined the direction of the stock, bond, commodities, and real estate markets. After the near collapse of the financial markets, bailouts from governments and Central Banks around the world became more of the norm as opposed to “Mom and Pop” investors. For example, the Federal Reserve became the primary buyer of stocks, bonds, and mortgages by way of Quantitative Easing (or create money out of “thin air” in order to buy assets and drive prices higher such as the Dow Jones index) and other bailouts. Each month, the Federal Reserve allegedly purchases up to $85 billion of Treasuries and mortgage bonds in order to keep interest rates as low as possible, and to allegedly try to better stabilize the financial markets.