Posts Tagged ‘Federal reserve’
Central bankers, bunch of

The Robosigner Validation Act post has been updated to include the following information from Yves. It warrants its own post because it makes abundantly clear that on the whole our central bankers are either clueless or captured by vested interests.

It is not just your humble blogger who claimed the Feds policies were so flawed as to be incompetent at best.  It’s no wonder that in the US they resist an audit or even proper oversight from Congress. Don’t be distracted by the TSA. The government is abusing your hip pocket just as badly as your actual hip or the rest of your body.

Yves has a post detailing some central banking failings:

The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach (as are other central bankers).

Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government’s attempts to prop up the price of toxic assets no one wants is not helpful.

BIS slammed the easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, “the use of gimmicks and palliatives”, and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts “will only make things worse”.

BIS also cautioned that bailouts could harm the economy (as did the former head of the Fed’s open market operations). Indeed, the bailouts create a climate of moral hazard which encourages more risky behavior. Nobel prize winning economist George Akerlof predicted in 1993 that credit default swaps would lead to a major crash, and that future crashes were guaranteed unless the government stopped letting big financial players loot by placing bets they could never pay off when things started to go wrong, and by continuing to bail out the gamblers.

These truths are as applicable in Europe as in America. The central bankers have done the wrong things. They haven’t fixed anything, but simply transferred the cancerous toxic derivatives and other financial bombs from the giant banks to the nations themselves.

But the central banks have overseen the continued transfer of wealth from ordinary citizens to the financial sector. Was this intended or unintended? If unintended could it be an extension of regulatory cognitive capture? Perhaps a view that “what’s good for the financial sector is good for [insert your country]”.

Fraud in the USA

Alan Greenspan, Former Chairman of the Federal Reserve on the need to enforce the existing laws against fraud.

William Black points out  97% of the loans Country Wide provided to it were sold under false reps and warranties. If time pressed then listen from the 11.15 mark. It’s less than two minutes. You will then want to listen to the rest.

Black is something of an expert on the subject. Wikipedia summarises his Bill Moyers Journal interview:

“On April 3, 2009 Black appeared on Bill Moyers Journal on PBS and provided critical commentary on the U.S. banking crisis.[6] In the interview with Bill Moyers,[7] Black asserted that the banking crisis in the United States that started in late 2008 is essentially a big Ponzi scheme; that the “liar loans” and other financial tricks were essentially illegal frauds; and that the triple-A ratings given to these loans was part of a criminal cover-up. He said that the “Prompt Corrective Action Law” passed after the Savings and loan crisis mandated that ailing banks should be put into receivership. Black also stated that trying to hide how bad the situation is will simply prolong the problem, as happened in Japan’s lost decade. Black stated that Timothy Geithner is engaged in a cover-up, and that the administration does not want people to understand what went wrong or how bad the banking situation is today”.

Let no one doubt the US is eating its cultural seed corn.  There will be hell to pay, and rightly so.

Bernanke Deals Drugs, Admonishes Users

The Market Ticker has a vintage post, Bernanke Deals Drugs, Then Admonishes Users. It’s well worth reading if you can put up with the histrionics. The points are valid and he has been making them for some time.

I still think the most likely scenario is deflation followed by inflation.