The central message of our analysis is not that the origin of today's difficulties is uniquely in the household sector or that the residue of these difficulties has scrambled the whole credit structure in the financial markets. Everybody knows about these troubles.
On the other hand, too few observes have noted how the consequences of these developments are going to require an extended period of time before the blockages they impose have been eliminated. But that is not all they have missed. This extended period of difficulty is going to bring about a new economic régime, different in many aspects from the experience of most people alive today. Along the way, we will have to pass through a transition period that harks back to an unfamiliar past in both the financial system and in the household sector.
I found these comments so spot on, and have ruminated about the same here in this space. Not as cogently as Bernstein, most assuredly. The dynamic tension is one that from bad springs better--and it comes upon you without your realizing it.
4 comments:
The financial elites essentially use the media as a tool to employ mass psychology programming - in an attempt to turn the public opinion the way they want it.
We have been bombarded with stories of a 1929 type collapse.
Now we are seeing an increasing number of stories being floated in the financial media that governments may have to bail out distressed financial markets - and the stories are trying to convince the sheeple that this is a good thing.
Who are writing these stories?
Where did the impetus for all these stories come from?
My greatest fear is that this is being done to allow a new 'economic' regime as Maudlin calls it - to come into being.
One in which the US government in collusion with the bankers - simply uses the current crisis (which they created) as a means to extend and concentrate their power.
They are doing this because they have to.
Like a "Big Bang" derivatives exploded and became scattered throughout the financial universe.
Leisa is there really only one and only one solution to the mess?
The problem with derivatives - is that they were supposed to spread risk. They have not.
This is their Achilles heel.
In fact they created even greater risk because if one major counterparty fails - the Ponzi deck collapses.
JPM is the biggest derivatives player of them all.
All JPM needs to do is (through the Fed) buy every large financial firm when it gets in trouble with it's derivatives.
Then like a Schwarzschild Wormhole
all the derivatives which were once spread out all over the place - get sucked back into a Singularity... one source... and then...
Presto - they just disappear electronically.
Then creation can begin again.
'nice
Last year I tackled Hedge Funds and Systemic Risk. None of this stuff has been a surprise to me other than how long it has taken to unfold. I saw clearly then that spreading risk equated to systemic risk. The opacity of it all is very disconcerting. The scope of it--affecting folks who did not make active decisions regarding the placement of their money in some of these specious instruments (e. g. money market funds).
I don't pretend to be smart enough to propose alternatives. But I do know that the investment bankers are likely to find themselves in the cross hairs of rabid reformists. They want the protection without the regulation. I will write my Congressperson and make my disdain for that gap known and ask for its closure.
Rather than focus on the news that is being reported, I'm trying to be more cognizant on the news that is NOT being reported. I'll point out, again, that there is precious little being reported on what happens in 28 days at the repo window.
I find all of this so distasteful. It makes me wish that I were a securities fraud litigator!
This is why I like the web so much. We, as average Joe's (or not so average) can discuss everything we encounter. Honesty gets a chance. One day I suspect those incharge will figure out a way to control these blogs or make them illegal. Honesty is the weapon of the masses and the bane of those who believe the rules do not apply. Greed is the weapon that large Corps. function on. We need brutal rules or legislation insuring that politicians, lawmakers and Corps are not allowed to exchange money for favors. Greed and avarice have been slowly eating away at all of us. If we force those who lead to follow higher morals then it flows through to the rest. Just my thoughts.
William B
Great piece.
If you follow the thread of his logic--- and examine what has been out of favor in the markets-- they seem to converge. High quality US companies are selling at the same premium as the market and have been for 3 years. That is extremely unusual and mean reverting. Since these are slightly higher beta, and would be hit just as hard by a selloff as others, timing entry into companies with strong balance sheets and stable earnings is a bit problematic!
Cat
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