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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (40233)	9/22/2008 12:55:32 PM
From: TobagoJack	4 Recommendations Read Replies (4) \| Respond to of 218068

the move in favor of gs and ms smacks of crony capitalism, more so than anything that had happened before the onset of asian financial crisis the move in prop of fannie and freddie smacks of systemic corruption, more so than anyone can get away with in private asia just in in-tray, the road to depression it's simple economic logic. economic downturns are not natural disasters like hurricanes. they are the economy's attempt to readjust itself after an artificial (man-made) credit-induced boom - in other words, the bust is a healing process, during which the economy's structure of production realigns itself with reality. any interference with this process distorts market signals and leads to further mistakes in resource allocation, while harming all those who have been prudent (savers, competitive firms that kept their debt load manageable, etc.) and are actually supposed to represent the foundation of the next upswing. the government does not have any resources or capital of its own. this means that when it intervenes, it must perforce take those resources from those sectors of the economy that generate wealth, in order to prop up sectors that consume wealth. the net result is that the productive sector of the economy gets weakened, while resources are diverted to unprofitable ventures that would normally have gone bankrupt already (they could only exist while the artificial credit boom was still underway - AIG's book of CDS is a good example). in other words, the resources, instead of producing wealth, are now being consumed. this is akin to burning one's furniture to heat the house. one keeps warm for a while, but in the end, the furniture is gone. there has already been an experiment in interventionism on a grand scale in the 1930's - it was an utter failure for these very reasons. note also that a constant stream of government intervention and ad hoc legislation/regulation creates a climate of uncertainty that harms markets and the economy over and above the resource allocation problem. since no-one knows what they will think of next , businesses and market participants become increasingly reluctant to invest or act. i haven't even mentioned inflation yet, suffice it to say that the most harmful effect of inflation is exactly the same one - resources tend to get malinvested, because market participants get a wrong impression of the amount of resources that are actually available. lastly, there is a tendency of government to 'fix' the unintended consequences of previous interventions with more interventions. it is generally not considered that central planning could be harmful per se - it's always thought that it would be just fine if only done right , so the tinkering never ends. in a major economic downturn it tends to become downright bizarre at times (such as FDR burning crops to raise prices of ag products while people went hungry). it always makes the situation still worse.

To: Haim R. Branisteanu who wrote (40233)	9/22/2008 3:25:43 PM
From: RJA_	Respond to of 218068

>>this is a huge amount of confetti You bet it is. And that result is being reflected in the markets. The center of the current world monetary system is not dependable as a store of value. Simple fact. I am disgusted with Russian behavior and Putin as much as you are, but in this case he is right: "We all need to think about changing the architecture of international finances and diversifying risks. The whole world economy cannot depend on one money-printing machine," itar-tass.com The markets are speaking, and that is what they are saying. Hat tip to: Message 24978625