Preparing for Chaos

“Last week the Securities and Exchange Commission announced new rules for money-market funds. Funds will now be allowed to deviate from the heretofore sacrosanct $1 pricing model. The abilities to charge penalties for withdrawals as well as to delay payment were also part of the announcement. This should be considered an omen to investors when considering how much capital to maintain in these funds as well as the investment strategy of the funds in which money has been invested.”  See:

They call these changes “reforms”.  I call them alarm bells.  In essence, these reforms have similar characteristics to restrictions preventing a bank run.  Anytime they limit withdrawal of your money, it should be called a new restriction of your money.  Penalties on your money is another name for negative interest rates.  These changes would not be made if those in power were not concerned about the financial storm ahead.

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