this tightness issue goes to the heart of managing via Fed
in a free market, we might not have gotten into such a bad mess with excesses and imbalances and financial boils in need of lancing
then, banker tightness would do exactly what was needed
FORCE LIQUIDATIONS, CLEANSE BALANCE SHEETS, BANKRUPT WHERE NECESSARY
but we have a Politburo mentality with the Federal Reserve (with audacity) attempting to manage the credit markets, resulting in outrageous failure
the reality is that liquidation, cleansing, bankrupting is necessary
but the political reality is that such a process is POLITICALLY UNACCEPTABLE
since it puts at risk funding the bloated federal govt, which contributes 20% to US GDP
so the Fed attempts to ease in aggregate, going totally counter to the responsible banking decisions in micro
a classic conflict
I believe everything the Fed touches turns to a bubble
the culmination of a magnificent economic expansion, resisting all international defaults in 1998 (Russia, LTCM), all perceived risks in 2000 (Y2K Snafus), and all internal liquidity realities in 2001 (economic recession) was a huge asset inflation problem
it started with stocks, moved to real estate, and now in Treasurys and the MortBacked Securities
everything turns to a distorted dangerous bubble when the policy makers refuse to allow capitalism to act in a capitalist fashion
namely, liquidations, cleansing, bankruptcies
get ready for one mother of a recession, wrought by a real estate stall and decline, complete with a dollar freefall crisis....
with a crescendo gold explosion
the timing is hard to pinpoint, the inevitability is certain
JPMorgan's problems only confirm the earthquakes which lead to our expectant climax
I remain, A Jackass |
