Caught Fleck on Bubblevision this morning.
Fella is one of my favorite 'set-up' artists. No one knows the future but the great ones can decipher the set-up, that is, knowing why something is going to happen without knowing exactly how it will play out. Generally spot on, with the specifics left to fate.
Fleck's summary : what were they thinking when they allowed such leverage against illiquid assets? Eventually reality will mark the assets regardless of the Federales' efforts.
Truth that.
The Fed is at 43 times assets to capital. WSJ reports that the Fed's equity could be wiped out by just a 2.8% drop in the value of its Treasurys and securities.
So a leveraged hedge fund with a book of derivatives that have a notional value of about 2%, that is not valuing its' collateral at market rates, golly better hope that hedge works. What? There is no hedge?
So for a normal hedgie the risk is 2% but for us 2% is the risk? Ruh-ro.
And that is why ladies and gentleman this humble blogger thinks the venerable Mr. Grant may be as incorrect about his zippy V as he was about his AIG call ... and for exactly the same reasons.
The fundamental question of these times : Were they criminally stupid or stupidly criminal? My gut says both.
At the same time, to channel Chris Rock ... I understand.
When the barbarians are at the door you save the silver first, 'tis an entirely human response.
That reality need be balanced however with another; without prudent regulation Marx was right.
A summation of our 'I Can't Believe It's not Capitalism' plan in response to the 'What just Happened' crisis?
Pay it Backwards.
The next generation is paying us to paper over the inevitable creative destruction that must occur and that will occur.
It is our destiny.
Wait for it.
3 comments:
Amen.
But don't worry, they will be stopped.
A universe in which there exists such a thing as an irresistible force is, by definition, a universe which cannot also contain an immovable object. And a universe which contains an immovable object cannot, by definition, also contain an irresistible force. So the question is essentially meaningless: either the force is irresistible or the object is immovable, but not both.
-Issac Asimov
http://www.mail-archive.com/ctrl@listserv.aol.com/msg06037.html
Fascism is hostile to Marxism, liberalism, and conservatism, yet it borrows concepts and practices from all three. Fascism rejects the principles of class struggle and workers' internationalism as threats to national or racial unity, yet it often exploits real grievances against capitalists and
landowners through ethnic scapegoating or radical-sounding conspiracy theories. Fascism rejects the liberal doctrines of individual autonomy and rights, political pluralism, and representative government, yet it
advocates broad popular participation in politics and may use parliamentary channels in its drive to power. Its vision of a "new order" clashes with the conservative attachment to tradition-based institutions and
hierarchies, yet fascism often romanticizes the past as inspiration for national rebirth.
Fascism has a complex relationship with established elites and the
non-fascist right. It is never a mere puppet of the ruling class, but an autonomous movement with its own social base. In practice, fascism defends capitalism against instability and the left, but also pursues an agenda that sometimes clashes with capitalist interests in significant ways. There
has been much cooperation, competition, and interaction between fascism and other sections of the right, producing various hybrid movements and regimes.
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