" Moral hazard has thus been made immoral certainty;"

[donsu]

http://www.atimes.com/atimes/Global_Economy/II26Dj01.html


THE BEAR'S LAIR
The Gotterdammerung of central banking


After pretending an unwonted firmness for a few weeks, the central banks in both Britain and the United States caved last week, accepting financial-sector bailouts and, in the US Federal Reserve's case, lowering interest rates. Moral hazard has thus been made immoral certainty; financial-market participants who indulge in grossly speculative activity can be "highly confident" (in the words of the old Drexel Burnham commitment letters) that they will be bailed out by the taxpayer. Rarely has there been such an obvious subsidy of the overpaid by the beleaguered. It raises the question: What if anything is the point of central banks in the new world we have entered?

-snip-

Meanwhile in the United States, the Fed cut interest rates, thus causing a massive Wall Street stock surge, undermining the value of the dollar, sending gold up to US$740 per ounce and doing very little to help the home-mortgage borrower, since long-term rates rose almost as much as he had cut short-term rates - unlike Fed chairman Ben Bernanke, the bond market fears inflation.

Then their regulators allowed the over-leveraged and accounting-inept housing agencies Fannie Mae and Freddie Mac (the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp) to buy another $20 billion of mortgage-backed securities, to the further ultimate risk of the taxpayer - Freddie promptly snapped up CIT's US$4 billion portfolio of securitized subprime junk, precisely the rubbish that puts its solvency in most jeopardy. Finally Ben Bernanke appeared before Congress and supported legislation allowing Fannie Mae and Freddie Mac "temporarily" to guarantee "jumbo" mortgages above the current statutory limit of $417,000.

-long historical snip-

A new monetary system will be demanded in the next few years, after the excessive inflation and moral hazard of the present system have caused the inevitable major crash. At that point, a bimetallic quasi-gold standard should be the alternative to work for against the statist and inflationary nostrums that will doubtless be proposed.
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next few years?!

[donsu]

1. do the prez canidates know a new monetary system is coming soon?

nt