Keynes was able to write the overall Theory because he was a mathematician by training and a supreme logician. A lot of the logic in the General Theory is a brute-drive application of logic to accounting as Keynes developed it at the macro level. He developed national income and wealth accounting before it was developed officially.
And he does this regarding loanable money. That was his core message about loanable funds. Anything discussed any of it beyond that is bunk. Any idea good or bad slapped together with it will just be weighed down by such foundational gibberish. So it is with Krugman now as he involves his great new insight about how central banks set rates of interest while still not understanding this basic message of Keynes. Today I Keynes was alive, he’d be writing about how banks control their capital. I reckon that could answer fully the question about the utility of QE reserves in regarding a one page update to the GT.
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Now that you have a process, you will need to appoint the individual decision-makers. One of the biggest risk-mitigation steps is to divide fiduciary tasks among differing people. Much company-stock litigation requires conflicted fiduciaries who made decisions while being greatly affected by the business’s interests. One effective strategy is to appoint a self-employed fiduciary who’ll evaluate the company stock totally, monitor its continuing performance, and make suggestions to the plan’s trustee. The most significant disadvantage to the option is the plan sponsor loses impact and control over your choice, but this is also the best advantage.
Independent fiduciaries generally operate under a presumption that the business stock should continue to be offered and can only change that presumption when there is clear evidence that the organization’s financial condition is in doubt. The program sponsor always keeps the responsibility for the choice and monitoring of the impartial fiduciary. Many plans find the cost of an unbiased fiduciary to be prohibitive.
If an independent fiduciary is not an option, at a minimum, the plan sponsor should consider forming a separate committee of skilled company officials whose only fiduciary role is to evaluate the stock and provide a recommendation to the trustee. Whatever strategy is selected, the necessity is clear: to mitigate the plan sponsor’s liability. The more involved senior company officials are who’ve nonpublic (insider) financial knowledge, the greater the risk of corporate responsibility after a steep decline in the stock’s value.
Thus, you should consider removing these individuals’ participation in the plan’s fiduciary framework or limiting their involvement in your choice to provide company stock. If an idea sponsor chooses never to appoint an independent fiduciary, the investment committee will retain the decision-making expert, as it does over other investments, and it will use the same evaluation criteria. An organization stock’s performance may be more volatile when compared to a normal investment standard because the company stock is a single security.
Therefore, the investment review must determine when there is evidence indicating that the business should stop offering company stock. Sudden drops in stock price. Announcements of adverse events impacting the ongoing company. Recommendations of investment analysts. Decisions made by independent institutional managers about the company stock. Proof whether corporate insiders are selling or buying the stock.
Communications to participants must be carefully scrutinized to prevent any misrepresentations about the company stock or the company’s financial outlook. Businesses that overstate the advantages of their stock and neglect to advise participants of the risk of not diversifying out of company stock can find themselves in big trouble. Clearly connect in the overview plan explanation or in a stand-alone communication about the risks of buying company stock.
The communication should encourage individuals to seek advice from professional advisors regarding their allocations and the importance of diversification. Nothing will completely insulate an idea sponsor from the fiduciary risks that company stock presents, aside from not offering such stock. You can find, however, relatively effective and simple strategies that plan sponsors may take to reduce the risk. By the end of the day, none of the steps works well if you do not carefully document the fiduciary decision-making process surrounding the company stock and be sure to follow the conditions of your plan.