Read “Bernanke’s Dark Kingdom.”

Abstract:

I am going to show here that central banks have excessive powers which are coherent neither with democratic principles nor with morality. Their existence can not be justified from a mathematical point of view.

Because of the immediate dangers that are evoked in these lines I strongly suggest that you reproduce my deeds.

My Yield Curve.

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“The rise in global stock prices from early March to mid-June is arguably the PRIMARY CAUSE of the surprising positive turn in the economic environment. The $12,000bn of newly created corporate equity value has added significantly to the capital buffer that supports the debt issued by financial and non-financial companies. Corporate debt, as a consequence, has been upgraded and yields have fallen. Previously capital-strapped companies have been able to raise considerable debt and equity in recent months. Market fears of bank insolvency, particularly, have been assuaged.

… huge unrecognised losses of US banks still need to be funded. Either a stabilisation of home prices or a FURTHER RISE in newly created equity value available to US financial intermediaries would address this impediment to recovery.

Global stock markets have rallied so far and so fast this year that it is difficult to imagine they can proceed further at anywhere near their recent pace. But what if, after a correction, THEY PROCEEDED INEXORABLY HIGHER? That would bolster global balance sheets with large amounts of new equity value and supply banks with the new capital that would allow them to step up lending. Higher share prices would also lead to increased household wealth and SPENDING, and the rising market value of existing corporate assets (proxied by stock prices) relative to their replacement cost would spur new capital investment. Leverage would be materially reduced. A PROLONGED RECOVERY IN GLOBAL EQUITY PRICES would thus assist in the lifting of the deflationary forces that still hover over the global economy.

I recognise that I accord a much larger economic role to equity prices than is the conventional wisdom. From my perspective, they are not merely an important leading indicator of global business activity, but A MAJOR CONTRIBUTOR to that activity, operating primarily through balance sheets.”

http://www.ft.com/cms/s/0/e1fbc4e6-6194-….

For all clarity: Greedscam is on everybody’s top 10 list of most disastreous people, but when he writes that a prolonged recovery of global equity prices will end this crisis and enable economic activity again, one better takes note: His former colleagues are printing money, giving it for free to investment banks, who rally the US stock markets (EU follows slavishly, Asia also typically follows), and now fund managers are buying (having missed a huge part of the rally; don’t want to miss out even more), so their printing has now started a self-fulfilling prophecy.

The $ 50 trillion (yearly world econ.) question is: will/can consumers start borrowing again, to get to the status quo ante? or do we get a new, living within our means lifestyle?

Probably, you mean: to bust bubbles (as in the 2nd sentence you write about abandoned savings allowing the bubbles).

Geithner/Bernanke/Summers/Blankfein want to reflate and *not* to bust bubbles: Bernanke ‘prints’ money, gives/loans it for free to GS et al., who rally the equity markets.

And while the banks get a huge spreads, they do not give any of it to customers: borrowers still pay a high interest rate, but savers only get a low interest rate. Banks profit from both types of customers.

Borrowers and savers would both be much better of connecting directly with each other, instead of via banks as middleman!!!!

With interest on savings accounts at banks almost ZIRP, Bernanke et al. stimulate people to move their money from savings accounts into the equities markets, thereby continuing the rally.

It’ll happen again this time too.

Firstly, China is a huge example, with stimulus and loans going to businesses who decided that they didn’t want (or need) to better their companies but instead invest it in the stockmarket. Note 100% increases.

The US is the second, banks that reinflated equities instead of tackling their massive, domestic Real Estate and Commercial Real Estate losses.

No other time in history have we seen in so many countries close to 100% GDP debt, apart from World Wars. That is what we are in, a world financial War.

It looks like we’ve reached peak oil -as Greenspan hinted to the WSJ in Dec 07- and totally changes the future. Ultimately, money is not what keeps us alive -natural resources do.

Ah yes, ‘research’ is indeed propaganda. Nice comment, gets to what are the drivers of the market and our current predicament. Could have gone a bit deeper to the inherent problems of other peoples money and a fractional reserve regime in the instance of a fiat currency.

Well, we will live, for a while, and then the second of the inevitable double dips will happen. The high rate of unemployment will drive down almost everything, but causing more defaults (mortages, car loans, credit cards), restricting the ability of the average citizen to spend, and causing more drains on public programs, such as Medicaid, unemployment, etc., and by causing a sharp drop in state and federal tax revenues. By sometime next year, the GDP will lose all momentum, and GS and the others will experience the drain of toxic asset failure. And, guess what, there will be NO

…so do the armed forces.

The press uses it because they don’t have the time, tools, aptitude, education, experience or budget to do research of their own, and their mission is to “report”, not to evaluate, anyway. So, they lean on “sources” for cognitive activity more complex than choosing the stories most likely to sell whatever medium they’re publishing in, which function they reserve for their editors, who are directed by the media owners to publish the stories that increase readership (to sell more ads for higher prices).

Politicians use it when it supports their presuppositions about how the world works, regardless of how actual events evolve, and when it will help them get or retain votes by quoting “authorities” who agree with them. It’s analogous to using the bible to appeal to evangelical christians or catholics. The priesthood and the temples are just different. The politicians, as are the journalists, are just preserving their jobs. (My apologies to those journalists who genuinely investigate and research their subject. In the financial press, there are maybe two of them left. Fortunately, there are many in other areas, Judy Miller and her co-reporter excluded from this apology)

Simon, James, other bloggers (Krugman, deLong, etc.), several commenters on this blog and other blogs have noted the extreme danger of populating a federal agency or agencies with so many (actually, one is too many) still-practicing alumni(ae) of this particular priestly order. Of course they’re experts in the practice of their religion. But, they have a common agenda that excludes everyone who is not a card-carrying member of their club. They may say that they realize that the economic game is not zero sum and that acting for the common good lifts their quality of life, too, but, they don’t believe it. This agenda makes their expertise more dangerous, not more desirable.

Their agenda is to ensure that the lifestyle they’ve achieved (“earned” in their parlance) remains constant or improves. Of course, that’s everybody’s agenda. One of aspects of living that makes it worthwhile is diversity (variety is, after all, the spice of life). We all have different ideas about what makes a good life, about how to use our time best and what constitutes fun or gratifying activities and outcomes. These people are willing, when certain choices must be made, to choose that course that benefits themselves the most in the shortest, narrowest concept of benefit achievable.

This conflict isn’t just about GS or MS or JPM. It’s about Merck, Pfizer, Toyota, Mercedes Benz, Societe Generale, Ford, Microsoft, Intel, etc. And it’s about Harry Reid, John Boehner, et al. But, in this particular discussion, it’s about the power of a single belief system as enacted by the priests (high and mid-level) belonging to a particular religious order to influence or control the lives of this population (sheep?) unduly.