Re: Financial Sector self-destructing

On Mar 28, 10:28 pm, "anon" <m...@xxxxxxxxxxx> wrote:
"Econotron" <njmfi...@xxxxxxxxxxx> wrote in message

news:SXbHj.25$oE1.13@xxxxxxxxxxx



Fed knows that there would be no rerun of 1929, for the reasons explained
here and elsewhere.

The problem is the current Fed chairman. He has spent his life studying how
to prevent the 1930s. And he wants to use his solution regardless whether
the problem is similar. He sees deflation behind every corner. He has a
solution (helicopters) looking for a problem.

The way the paper based money works, a government can always engineer enough
inflation by just giving away money. He said as much.

The natural cycle in a fiat currency based system and a dishonest financial
sector in cahoots with a pliant govt (the path of least resistance) is
inflation and more inflation (ie, stagflation). In real terms it just means
devaluation of honesty, and declining living standards for the people who
trusted the system.

The real casualty is the credibility of the US and its currency. The US
always called for "fiscal and monetary discipline" when the crises hit in
Asia and Latin America. Obviously the medicine was for others, not for the
US. This means the next time the US tries this trick to buy super cheap
assets in third world countries, it will be laughed out of the room. Putin,
Chavez etc have understood this well.

The Fed with infinite buying power can always bail out whoever it wants and
the bailed out will always claim "the action was historic and brilliant".
The virtue of the Central Bank is maintaining honesty and fair play in the
system, not in post-bubble cleanups - these actions just imply ever quicker
bubbles because the cost of the bubbles is borne by the honest people. A
free rider problem.

It is easy to become a hero following a path of least resistance and
spoiling the (speculator) children with other people's money. Again,
speculators close to the Fed will win, working honest people will lose. It
is not enough to punish the shareholders of the investment banks. By
removing the counterparty risk the Fed has only made sure that more and more
contracts will be created where the profit will go to the investment banks
and losses to the people. As long as they can make a big enough bet to be a
danger to the system, they have won either way.

The way out is to strip the Fed of its powers. Unfortunately currently it
seems the Fed will end up with more powers.

Pass the Hohensee Feingold Amendment and the Fed will have its powers
reduced.
Like setting a minimum rate at the discount window, by law. Like 3%.
And killing off this
making speculators part of the monetary system that Berpanicky has
initiated.

RH
.