Skip to comments.Inevitable Catastrophe - The Fruits Of Moral Hazard On A Global Scale
Posted on 06/25/2011 10:16:01 AM PDT by Nanomaker
Inevitable Catastrophe: The Fruits Of Moral Hazard On A Global Scale
Insulate participants from risk with policies like the Bernanke Put and you guarantee destruction of both the market and institutional legitimacy.
Identify the common characteristic of these three statements:
1. The Federal Reserve will never let the stock market decline, i.e. the "Bernanke put"
2. The Chinese government will never let property prices decline
3. The European Central Bank will never let Greece default
The answer of course is moral hazard: a person who is insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government. The global financial authorities success in propping up assets (stocks in the U.S., real estate in China, banks in Europe, etc.) over the past three years has strengthened this asymmetric disregard for systemic risk into a dangerously quasi-religious faith that central banks and governments have essentially unlimited power to keep asset prices aloft via printing money, manipulation of markets and financialization of their economies. What happens if markets crumble despite massive, sustained central bank and government intervention? The institutions that created moral hazard will be revealed as false gods, and that faith will be destroyed.
This loss of faith in the transparent functioning of markets will trigger what I call the delegitimization of both the markets and the institutions which have essentially promised a permanent upward bias in assets.
We can see the global scale of this central bank-central State induced moral hazard in the tight correlation of all markets: the stock exchanges rise and fall in near-perfect unison, oil and gold rise and fall in parallel with equities, and so on...
Transparent, independent markets do not move in lockstep...
(Excerpt) Read more at zerohedge.com ...
Re: moral hazard: You might as well try to explain penicillin to witch doctors.
The global bailout will require SDRs to supplant all currencies. The Fed goes global.
Well, desperate times call for desperate actions - even by governments. And they are desperate indeed.
Problem is, when governments do desperate things people start dying by the millions - and tens of millions.
Yet another Ezekiel 39 thread.
>>Once you really start looking at the amount of fraud and outright manipulation of the economy by the fed, the more you really realize just how totally screwed we are.<<
Our situation, regarding those of us that have been paying attention, reminds me of a poster I saw on a co-workers wall back in 1984: The truth shall set you free, but first it will make you sick.
The love of money is the root of all evil. Call it what you will, but if you’re willing to cheat your neighbor for money, the problem isn’t the institution....it’s the person doing the cheating. Hanging can cure most of these problems.
Oh quit your whining. They usually get to go through a period of marginalization culminating in ghetto-life before they're forced into slavery and then sent to death factories.
And besides, life will never be better for the "in crowd" when the sun rises on those days.
“The love of money is the root of all evil.”
To nitpick just a bit, this is an almost universal misquote of the apostle Paul. He wrote; “The love of money is the root of many kinds of (or all sorts of, or much) evil...” Tim 6:10
There are lots of other evils other than avarice.