You know it’s bad when banks are the most truthful guys in the room.
That banks get ever bigger, that they routinely hand out multi-million dollar bonuses, and that they frequently get bailed out, is not a result of the greed of the bankers – a stupid explanation anyway, only satisfactory to the intellectually challenged and perennially envious – but is integral to the fiat money system.
Once again, our political “leaders” are looking to foist the blame for problems they created onto someone else. Bankers are a pretty convenient and unpopular target.
You can tell a story that the creation of the euro resulted in a bloated European financial sector, which then funded the U.S. housing bubble.
As he explains, and as we and others have pointed out, the plan is to have insolvent European banks load up on insolvent European sovereign debt. That is what I keep describing as two drunks trying to prop one another up and make it home.
Another metaphor that keeps coming to mind is the Monty Python pet shop routine. The politicians are like the store clerk, insisting that the parrot is alive. The market is like the customer, who thinks that the clerk is, er, mistaken.
Another metaphor that keeps coming to mind is the Monty Python pet shop routine. The politicians are like the store clerk, insisting that the parrot is alive. The market is like the customer, who thinks that the clerk is, er, mistaken.
If what we really need is to solve the problem of Italian and Greek growth, then we’re hosed. Italy and Greece face some pretty large and intractable problems—one of which is the euro. And even if that weren’t true, the record of foreigners marching into a place and whipping its institutions into shape is … well, how’s that Afghanistan thing working for us?
If the regulators do not want to shrink the financial sector, then they have to try to prop it up, in part by labeling securities as low risk when they are not. Which is how the financial sector got to be to big in the first place. The regulators labeled mortgage securities as low risk when they were not. Then they labeled sovereign debt low risk when it was not.
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Today on the Eurozone Crisis, Arnold Kling | EconLog | Library of Economics and Liberty It is gradually dawning on people that we regulated our way into the financial crisis, yet people still believe we can regulate our way out of it! |
Much of the discussion about the ultra-low interest rates seems to be based on an assumption that the only danger is a re-emergence of inflation, and as long as inflation is comfortably around the corner, then the low interest rate policy can persist indefinitely. But if the low-interest rate policy is promoting excessive leverage, tricky financial engineering, and a waning of due diligence in other assets, this set of risks also needs to be taken into account.
This goes deep inside the recent US financial crisis, the theory behind Fed operations, what actually happened, and what it might mean for Europe. This is excellent, but not for the faint of heart.
What if there are good reasons for the preternatural calm of German Chancellor Merkel’s inner circle as the English-language media (based, after all, in the investor capitals of London and New York) light their collective hair on fire about the euro’s imminent immolation?
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David Apgar: Could Germany Be Right about the Euro? « naked capitalism An unconventional and intriguing view of the Euro crisis. |
It is getting more difficult to foreclose on a defaulted mortgage. According to LPS, the average time to foreclose now takes 631 days … This is one of the biggest problems we have and it a major factor contributing to our economic malaise. Many banks still hold these mortgages and the longer it takes to get rid of them, the longer their balance sheets will be tied down with bad debt.
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Foreclosure Time In U.S.: 631 Days | The Daily Capitalist I don’t hear a lot of sympathy for the banks these days, but it’s a fact that it’s difficult for the economy to rev up when the banks are sick. |
Back in 1884 there was a financial crisis that was, “triggered by an overflow of gold abroad, as foreigners began to lose confidence in the willingness of the United States to remain on the gold standard.” As Jim Grant describes, the crisis was “the real McCoy — ‘the wildest kind of panic raged, and securities were thrown overboard regardless of price.’” In those days there was no Federal Reserve, no lender of last resort, no central bank (or multiple central banks) to flood the market with liquidity and cheap credit. So, left to the market, the overnight money rate rose to 4% — per day! (That’s a higher rate than your local payday-loan store offers these days) But the crisis only lasted three weeks, writes Elmus Wicker in Banking Panics of the Gilded Age. The current crisis? Three years and counting.
The US is in serious, perhaps irretrievable, financial trouble. There is a lack of political or popular will to take the action necessary to even stabilise the position. The role of US dollars and US government bonds in the financial system mean that the problems are likely to spread rapidly to engulf other nations.
Somehow, the governments and the banking sector remind me of two drunks leaning on one another, trying to make it home.
