Umair Haque / Bubblegeneration

Tuesday, January 22, 2008

The Bernanke Put and the Macropocalypse

Lol, look, it's the (Godzilla-sized) Bernanke Put.

If you're not sure what just happened, let me spell it out.

By preventing the market from finding a bottom, the Fed just transferred risk from hedge funds, banks, and other people holding illiquid assets, to you - people holding liquid assets.

Bernanke is essentially inflating the US economy out of a debt crisis.

It will rally the markets in the near-term - but does nothing to change the rotten DNA in the medium-long run.

In fact, the problem with deflating your way out of a debt crisis isn't just that it destroys your credibility - it's that it destroys the market discipline, the incentive for value creation, etc.

Let me put it as simply as possible. Unless you're in on the fix, you just got taken to the cleaners.

Bush is gonna cut you a check for a few hundred bucks. The Street goes back to sipping Cris for a few weeks.

The dollar falls, the losses are still infecting the books, and Main Street spends even more money it doesn't have - at a steeper cost than ever before.

See the problem? The mortgaging of the American economy to dubious creditors continues; the rot infecting the financial body spreads - just at a more furious pace than before.

Despite superficial commentary like this, the Bernanke put won't have much of an effect. It's like treating cancer with Jack Daniels.

-- umair // 2:18 PM // 1 comments

Comments:

you think they don't know what they are doing? they are so corrupt they don't even care it we know they are corrupt

better to just ignore them, let tem play in the coffin of their beliefs and values, they have no power, except what we give them. refuse to give it

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gregory // 4:48 AM