Skip to comments.Paulson, Bernanke, And Geithner: You Were Right - We Were Wrong — Thank You For Saving The Economy
Posted on 12/11/2012 5:22:45 PM PST by blam
It's Time To Tell Paulson, Bernanke, And Geithner: You Were Right And We Were Wrong Thank You For Saving The Economy
Mark Dow, Behavioral Macro
Dec. 11, 2012, 2:07 PM
Mark Dow is a proprietary trader and author of the blog Behavioral Macro.
The U.S. Treasury this morning rid itself of the last piece of exposure it had to AIG, the insurer at the center of the 2008 financial crisis. Both the Fed and the U.S. Treasury intervened heavily during the crisis, with the ostensible objective of stabilizing the system and circuit-breaking the self-reinforcing fear that was already rippling through the financial system.
So, go ahead. Today is the right day to say it. Thank you Tim Geithner. Thank you Ben Bernanke. Thank you Hank Paulson. We were wrong. You were right.
(Excerpt) Read more at businessinsider.com ...
Yeah, right. These numbers are as true as the labor statistics or any other number coming from this administration. I also heard how the housing market is roaring back as well.
Can we also BLAME BUSH (err, thank Bush) and subtract the AIG loans now repaid (with interest) from the “mess” inherited by lil’ Barry?
Surely, this piece is satirical.
Guess it wasn't such a mess after all, eh?
We are no where near a recovery. My prediction is that Obama will force us over the fiscal cliff, and things will be worse soon.
I reread it looking for the satirical zingers, but there weren't any. Something about the Fed's $3 trillion balance sheet used to prop up banks (while allowing politicians to borrow more). Or maybe the that the people who have dropped out of the workforce are greater in number than employed by the big banks. Or gas doubling or stagflation or something. But there was nothing.
They were and are wrong to protect zombie assets in zombie banks. Liquidating would have allowed the markets to start over. They were and are wrong to extend the low interest rates that have destroyed the long term capital market and turned everyone into short term speculators. They were and are wrong to extend the biggest bubble of all time, US Treasuries so that the crash will be much worse than the early 80’s. They were wrong, they are wrong, and there’s no way to finesse it to make it right.
So many wrongs, so little FR time to account for them.
Duh, does this prove that Government can spend it’s way to prosperity?
Remind me NOT to take Dow’s advise. I don’t want to go on welfare and unemployment waiting for the economy to improve.
They’ve let 417 banks fail in the last 4 years. That’s almost 5% of all U.S. banks.
Without Tarp there would have been many many more and the damage would have extended to many U.S. businesses, more than it did.
But Tarp would never have been necessary if we hadn’t forgot the lessons of history and removed the protections we had in place.
The same thing is true of trade. For most of our nation’s history we had protective trade tariffs in place. Now free trade with low wage countries has devasted our industries and left our people out of work.
Short term business press promotes that the FED and Wall St. insiders were right in saving the system they imploded by creating trillions of dollars out of thin air and loaning it to themselves at 0% in exchange for assets marked to market that are worth nothing, at which they stuck future taxpayers with by privatizing their profits and socializing their losses.
Meanwhile every financial curve tied to debt has exploded exponentially and they have no more suckers to milk with this ponzi scheme which will eventually implode. In order to keep it stable they have to pump 90 billion dollars a month into Wall St., but hey these guys have saved us all. What a load of crap.
If you want to see someone who actually saved themselves from this never ending ponzi financing, look at how Iceland handled the situation. It didn’t involve rewarding the guys who blew up the system, it did involve cutting their losses and taking their medicine.
Good points but the interesting thing is the Fed can keep printing money to prop up bonds, stocks and member banks without authorization from Congress. They only need authorization to allow member banks to buy US Bonds in return for federal reserve notes.
It’s even more interesting that the specter of inflation is kept at bay by strict money lending to the private sector.
The Fed is holding a lot of debt. To continue the charade in propping up member banks they must allow bond sales to China and others who think bonds are a safe haven. But ever more bonds at virtually zero to negative interest rates leads investors such as the Chinese to become disgruntled. The Chinese have been trying to dump the bonds they have.
Without willing bond investors, the Fed finds themselves in a quandary as to how to keep the charade going. They want the debt ceiling raised to keep their member banks as primary bond investors buying paper from the US government without worrying about what China will or won’t do.
Without the US Government selling bond paper in exchange for Fed paper (go over the ‘cliff’), the supply of bonds defaults to corporate and local bonds but those risk kindling inflation in the private sector.
The only way out is to raise interest rates which will choke US Spending which to us as conservatives is a good thing but it means cuts in military, cuts in research and universities, strangling the auto industry (housing is already near dead), and eventually cuts in medicare and social security. None of it will be good and the only question is who will be successful in laying blame, Obama or the GOP House?
The GOP was and is stupid. They put the debt ceiling off until after the election. Gawd they are so stupid it is maddening. Had they let the chips fall where they may, Obama would have been been in flight away from the raging anger of voters. Bu then we would have had Romney who is RINO to his core.
So Obama is not going to be blamed right away. The public may have difficulty accepting the MSM campaign to blame the republicans but someone or some group is going to catch Hell somehow. It is possible that the public can be led to focus on Sheriff Arpaio’s findings and this can lead to Obama being ousted. This could be a relief valve for venting the certain anger to come. This sounds like a long shot but blame and anger will find an outlet somehow. There has to be a sense of justice, a scapegoat.
If the GOP caves on the debt ceiling which I expect them to do, then investors from Moscow to Dubai to Beijing are going to continue forward with more speed to replace the US dollar as the world’s reserve currency. To do this Russian oil needs market share from the Saudis and Euros becomes the reserve currency. Doesn’t matter that Europe is in a depression. What matters is the oil traded in Euros and the Russians are happy to do that with the Chinese.
But for Russian oil to get market share they need to displace Saudi influences. Saudis are content to allow the US dollar to hold as the reserve currency because they invest in gold anyways. The world’s richest person is Prince Alwaleed, worth 26 trillion US dollars half of which is in gold.
And that brings us to the point of Bengazi, Iran, Hamas, Libya and Syria. That theater is a chess match between Saudi and Sino-Russian powers with the US backing Saudi interests via usage of the US military and intelligence assets as mercenaries.
What else could focus the public’s anger and quest for a scapegoat or a diversion? A war somewhere. But then watch oil and gold soar and that in turn means inflation at home. People are going to hurt, Americans are going to hurt. who will be the Bogeyman?
Most of the public has not taken the time to become informed at the sorry state of this current scam being ran by all the insiders. The MSM and business press would make PRAVDA from Stalin’s days proud by the level of disinformation and rainbows, unicorns, and sunshine they pump out 24/7 to the masses.
None of this matters of course. Kyle Bass refers to this stage as the Keynesian endpoint for the world super debt cycle begun by recovering from WW II. It is a giant vacuum cleaner sucking trillion after trillion down it at zero percent as the world debt is 3.5 times larger than the world GDP. Over leveraged and trapped, the masters of the universe keep playing musical chairs because they have no other choice. Over time one chair after another will be removed until the game is over. Greece bond holders lost 90 cents on the dollar and they will lose more because Greece is still broke. No one can stomach the solution so they cling to the hope that another bubble can be created to postpone the mathematical end game of exponential debt growth.
One thing we know from history, is that in the end, what goes up will come down. The final economic reset will reshape the world. Who owes who what will no longer matter. Some think this is a precursor to global government, some think this will lead to every man, corporation, and country looking out for itself.
Kyle Bass is a good analyst but conflicted in how to make the play in observance of his fiduciary duty against what he lectures others about.
He correctly infers this ends in a world war because of sovereign debt ratios to GDP causing societal entropy or disorganization, meaning a huge swath of people unable to meet basic needs and a government that has printed their currency to the point that payments for servicing sovereign debt exceed government revenues.
Kyle says Japan is the one to watch and I agree. If interest rates move 2 or 3 hundred basis points up, then Japan is finished. All of their revenue will be needed to service their debt. If they default and they will, then creditor nations will be faced with the question of do they allow their own government and banking to collapse at the expense of the Japan default without Japan restructuring (coming up with assets to liquidate to keep all governments afloat).
This structural conflict will of necessity result in armed conflict as creditors attempt to seize Japanese assets in order to survive themselves. And as Kyle points out Japan is xenophobic with less than 3% of its population Japanese. This means with certainty that as a scapegoat is sought, the Japanese people will and must become militant to survive and protect what they have to survive.
And there are many others besides Japan that are in the same situation.
And Kyle is correct in calling out that governments will devalue even as they say until the last minute that they will never devalue their currency. He has plenty of historical examples of presidents and prime ministers saying there will be no devaluation and then the next day there is a devaluation. As soon as there is a default or a devaluation (the latter occurs first or follows the former), then their currency is finished and inflation runs out of control.
Where Kyle is conflicted stems from where he made his fortune which is in sun-prime RMBS. He is conflicted because his firm manages a lot of non-agency RMBS and he is recommending clients and investors to move into non-agency RMBS.
The bottom-line is nobody knows yet where to make money as currencies race to the bottom.