💭 Quote of the Day

"The best way to predict the future is to create it."

Peter Drucker

What Really Matters

🤔 Is More Regulation the Answer? 

Dodd-Frank has not been effective in preventing banks from taking on too much risk. Though stricter capital rules are touted as the solution to U.S. banks’ vulnerabilities, Credit Suisse has shown that big buffers don’t guarantee stability.

• More regulation was supposed to turn highflying banks into “boring” investments. A higher cost of capital meant lower profitability, but a negligible risk of failure also meant lower risk. The idea was for bank shares to become steady income payers, almost like utility companies

• Yet, though the return on equity of developed-world banks has fallen to a utility-like 10%, from around 15% in the mid-2000s, the bank sector almost matches technology for volatility. That suggests investors are taking on quite a lot of risk

👎 Eurozone Enters Recession

The Eurozone economy shrank by 0.3% in the first quarter of 2023, as inflation dragged down growth. Inflation in the Eurozone reached a record high of 8.1% in May, driven by rising energy and food prices.

• The European Central Bank is expected to raise interest rates in July in an effort to cool inflation, but this could further slow growth

😲 Bank of Canada Shocks Markets

The Bank of Canada raised its key interest rate by a full percentage point to 4.5% on Wednesday, the biggest increase since 1998, as it moves to cool inflation that is running at its fastest pace in 40 years.

• The central bank said it is “strongly committed” to bringing inflation back to its 2% target. It is expected to continue raising rates in the coming months

• The Bank of Canada's decision comes as central banks around the world are tightening monetary policy in an effort to combat inflation

Market Movements

Several stocks moved significantly in after-hours trading on June 8, 2023:

• DocuSign, Inc. (DOCU) rose 15% after the company reported strong earnings and revenue for the first quarter of 2023

• General Motors (GM) gained 4% after the automaker announced plans to invest $35 billion in electric vehicles and autonomous driving technology over the next five years

• Vail Resorts, Inc. (MTN) fell 8% after the ski resort operator reported weaker-than-expected earnings for the first quarter of 2023

Personal Finance Quick FAQs

Q: Why can’t we just print more money?

Why Not?

In a time of economic uncertainty, it might seem tempting to simply print more money. After all, if there's more money in circulation, everyone will have more money to spend, right?

Wrong. Printing more money actually has the opposite effect. It leads to inflation, which means that prices for goods and services go up. This makes it harder for people to afford the things they need, and it can even lead to a recession.

Reasons Explained

There are a few reasons why printing more money leads to inflation.

• First, when there's more money in circulation, people are more likely to spend it. This increased demand for goods and services drives up prices

• Second, when the government prints more money, it has to borrow more money to pay for it. This increased debt puts upward pressure on interest rates, which also contributes to inflation

So, if you're thinking about printing more money to solve your economic problems, think again. It's a surefire way to make things worse.

More Things to Consider

Here are some other things to consider when thinking about printing more money:

• It devalues the currency. When there's more money in circulation, each dollar is worth less. This can make it harder for businesses to export their goods and services, and it can make it harder for people to save money

• It can lead to economic instability. When inflation is high, people become more uncertain about the future, which can lead to a decrease in investment and economic growth

• It can lead to a loss of confidence in the government. When the government prints too much money, people start to lose faith in the government's ability to manage the economy. This can lead to social unrest and political instability

Rational

In conclusion, printing more money is not a solution to economic problems. It can actually make things worse. If you're thinking about printing more money, talk to an economist first. They can help you understand the risks and potential consequences.

Disclaimer: This newsletter provides general information and is not financial advice. It discusses current events and personal finance topics for educational purposes only. Consult a qualified financial advisor before making any financial decisions. The accuracy and timeliness of information cannot be guaranteed. Use this newsletter as a starting point for research, but conduct due diligence and seek professional guidance for your specific financial needs