Guest Post: Inevitable Catastrophe - The Fruits Of Moral Hazard On A Global Scale

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Fri, 06/24/2011 - 17:31 | 1399831 Josh Randall
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$hit on a Shingle: it's whats for Dinner

Sat, 06/25/2011 - 08:06 | 1400812 ethnik
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last move of players like Bernake or EB's to collect value of paper money from regular people, to take your savings. They are pretty aware of this. thats why they manipulate precious metals till its still possible.

Fri, 06/24/2011 - 17:36 | 1399835 apberusdisvet
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The new market mantra:

go long pitchforks and nooses

go short breathing politicians and banksters

Fri, 06/24/2011 - 21:56 | 1400354 Spirit Of Truth
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Dance with the devil of statism and ultimately you are inviting the devil to take charge:

Sometimes the most important role of government is in enforcing the FREEDOM TO FAIL. Not doing so invites collective suicide IMHO. We're going down The Road to Serfdom...

Fri, 06/24/2011 - 23:54 | 1400551 jeff montanye
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and the irony is that in the fall of '08 there was enough capital between the shareholders and the bondholders in the financial sector to support a profound reorganization without spending taxpayer money and while avoiding moral hazard.  

Sat, 06/25/2011 - 05:17 | 1400759 Reptil
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Bingo. A missed opportunity of gigantic proportions.

Sat, 06/25/2011 - 10:46 | 1400927 Flakmeister
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Instead we got a financial coup d'etat in TARP....

Haircuts are for little people....

Fri, 06/24/2011 - 17:34 | 1399839 doomandbloom
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buy the dip?

Fri, 06/24/2011 - 17:43 | 1399850 snowball777
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Buy the diiiiiiaaaaaiiiaiaiighghghg!!!!

Fri, 06/24/2011 - 17:52 | 1399877 Hurdy Gurdy Man
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Fri, 06/24/2011 - 17:39 | 1399840 snowball777
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Because, because, because, because, because...because of the wonderful things he does.

- Chick from Kansas and Friends


Fri, 06/24/2011 - 18:58 | 1400023 breezer1
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easy for you to say...

Fri, 06/24/2011 - 17:42 | 1399848 Thorlyx
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well said

Fri, 06/24/2011 - 17:44 | 1399859 There is No Spoon
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Bernanke jumped the shark with his decision to do press conferences. He voluntarily pulled back the curtain on himself, revealing that the Wizard of Oz is powerless and it's all a mirage. He's revealed himself to be a one trick pony. Since qe2 didn't work, he's been rendered useless and will surprise everyone by stepping down by the end of the year.

Fri, 06/24/2011 - 17:46 | 1399876 topcallingtroll
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Qe2 did work, if by work you mean that we avoided a great far.

It has been almost free money, because bond vigilantes are nowhere to be found.

Fri, 06/24/2011 - 18:14 | 1399936 baby_BLYTHE
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housing prices haven't seen declines like these since the 1930s

Fri, 06/24/2011 - 18:16 | 1399952 CompassionateFascist
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Real unemployment is now about the same as it was during the worst of the "great" depression. QE2 did nothing but further enrich banksters and other speculators...and ensure that the Great-er depression will be terminal for the entire System.

Fri, 06/24/2011 - 18:46 | 1400005 DoChenRollingBearing
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I suspect that QE2 worked only in the sense that by kicking the can further down the road will only make the reckoning even worse than if we had taken our medicine in 2008 - 2009.

I also suspect that almost free money will lead to very bad results.

Re bond vigilantes, I guess they all became bond buyers...

Fri, 06/24/2011 - 19:05 | 1400044 Hedgetard55
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He did make the end result that much worse.


There is no "free money". Everyone who owns dollars and cash equivalents got nicked for the money through debasement and the theft of potential interest income.

Fri, 06/24/2011 - 19:28 | 1400094 Mark Noonan
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Precisely - and that is why no matter how kooky everyone tries to make it out to be, we must get back to gold currency.

Fri, 06/24/2011 - 19:06 | 1400046 Founders Keeper
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Fri, 06/24/2011 - 22:56 | 1400444 mayhem_korner
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Qe2 did work, if by work you mean that we avoided a great depression

Er...huh?  Avoid or defer and exacerbate?

Qe2 turned the M-80 we were holding into Tsar Bomba...

Fri, 06/24/2011 - 17:44 | 1399860 topcallingtroll
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Lets see how monday goes. If i dont think ive caught a temporary inflection point time to get out of the stock market again.

If you cant beat moral hazard then join the party, but i might be getting back in too soon.

Fri, 06/24/2011 - 18:52 | 1400010 DoChenRollingBearing
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While I will not get into the stock market (other than more selling), I see nothing in your remarks that merits junks.

Fri, 06/24/2011 - 21:48 | 1400333 TimmyM
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Too bad for you TCT. Once everyone has embraced your confusing of liquidity with price continuity, the market will crash on an uptick.

Fri, 06/24/2011 - 17:41 | 1399861 viator
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Dear Ben,

We just heard on Bloomberg TV that prices at the pump have fallen 21 days in a row.

We know that while prices were going up every day, you got a lot of crap from people about inflation, and how you weren't doing enough. So we just wanted to say: Thank you!

Now sure, we don't drive -- we live in New York after all -- but that doesn't mean we can't sympathize with those people out there who do drive, and for whom gas prices were taking a bigger and bigger bite out of their paycheck.

So again, big thanks.


Joe Weisenthal
Fri, 06/24/2011 - 18:07 | 1399915 Kayman
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We just heard on Bloomberg TV that.... the federal debt is "just a number".

What a relief. I can tell my children and grandchildren that they have nothing to sweat about.

I feel so much better now.

Fri, 06/24/2011 - 18:53 | 1400001 Cruel Aid
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I've heard that 'debt doesn't matter' bullshit being spewed.

It doesn't matter till it does! And then it is too late.

Also, this is the buy the dip pause in the market. On cue.

Fri, 06/24/2011 - 19:49 | 1400136 Hacked Economy
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But it doesn't long as you encourage more debt from consumers below you, and inflate the credit side of the ledger books, which in turn inflates the economy.  Yay!

Unless there's a recession, and unemployment, and lower tax revenues, and a debt-fueled spending binge, and...


EDIT:  Looks like a junk troll made his/her rounds on this thread.  Look at how many people in a row got a single junk.  Jerk.

Fri, 06/24/2011 - 17:45 | 1399862 Robslob
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I had a thought...

We will all have the last laugh...when we die.

Fri, 06/24/2011 - 17:41 | 1399863 Deepskyy
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Once again, Charles lays out the ugliness around us in concise and simple terms.  Now if we can just get J6P to stop being concerned about Kim Kardashian's ass and start paying attention to the thieves all around them, we might get this ship righted.



I won't hold my breath.

Fri, 06/24/2011 - 17:46 | 1399872 km4
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The U.S. is too big to fail, right? MarketWatch

We are not Greece, many argue, but our country is clearly on an unsustainable path of deficits and increasing national debt and we must take steps to curb government spending and reduce debt levels.

The U.S. is too big to fail, right? But who would (could) bail the U.S. out?

Brian Edmonds is head of interest rates trading at Cantor Fitzgerald. He has worked in bond trading for several financial firms over his nearly 25-year career. Edmonds also formerly served as chairman of the Bond Market Association’s Primary Dealer Committee.

Fri, 06/24/2011 - 17:46 | 1399874 Piranhanoia
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These monarchs must have really nice places to bug out when/if their larceny is again considered a crime rather than a resume.

Fri, 06/24/2011 - 17:53 | 1399879 HileTroy
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Wow! That makes perfect sense all currency made of paper just gets printed and life goes on!!

 One small problem even though the world is filled with sheeple there are a few wolves left over from "Productive Industries" that have had there asses handed to them by dudes looking at six computer screens and playing games with the "Wall Street Economy"

Long bullets short Bankers Politician/Lawyers

When the Sheeple cant get there free cheese us wolves will point them in the right directions to stampede.


What am i missing ???? There is a shit stome of baddness heading for the human race, I see it in the eyes of men less capable on the MSM every night. Natural selection me thinks will make a big come back.

What a intresting time to be alive.


reposted from another thread cuz I think I'm such a clever pus.



Fri, 06/24/2011 - 18:27 | 1399966 css1971
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Y'know if you get them real mad, and you manage to rip their eyes away from the TV or Facebook? Put them out of a job, out of a home.


You know what they'll do?


They'll vote.

Fri, 06/24/2011 - 17:53 | 1399889 RiverRoad
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Lies, lies, and damned lies.....

Fri, 06/24/2011 - 17:57 | 1399890 sitenine
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4. The US will never be allowed to loose its AAA rating.

Fri, 06/24/2011 - 18:02 | 1399905 Thomas
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Not necessarily. Remember the banking cartel is global, so the US will indeed lose its AAA credit rating when this borderless (and despicable) group decide it should.

Fri, 06/24/2011 - 18:09 | 1399922 sitenine
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Fair enough statement, but do recall that Hong Kong considers Treasuries junk, and Germany's Feri recently downgraded US debt. S&P shills? Right, we know who owns them ;)

Fri, 06/24/2011 - 17:56 | 1399894 sasebo
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CHS, astute observation, as usual.

As usual we don't have to do anything, just sit back & watch the assholes go under. Give them plenty of rope.

Fri, 06/24/2011 - 18:54 | 1400021 DoChenRollingBearing
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Sitting back and watching will feel a whole lot better if you are prepared.  Popcorn and gold, great companions as we watch them go under.

Fri, 06/24/2011 - 17:57 | 1399901 10kby2k
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Why do you think its called a depression?  It sucks and is depressing. Here it comes and there is no stopping it.

Fri, 06/24/2011 - 18:01 | 1399903 NidStyles
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It's more of an Ethical Hazard. As no matter what it's detrimental to everyone, where as a moral hazard would be beneficial to someone at the expense of other's. Devaluing the monetary gain's and putting the entire system on tilt is detrimental to everyone.

Fri, 06/24/2011 - 18:04 | 1399909 VyseLegendaire
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Good concise summary here.

Fri, 06/24/2011 - 18:04 | 1399920 midnight
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ZH, an hardcore bull speculators blog/forum, whining about moral hazard. Wow!

Fri, 06/24/2011 - 18:11 | 1399925 Atomizer
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Considering Bernanke has openly admitted uncertainty on his policies, the time is approaching quickly. Cutting out the middleman shall become the handwriting on wall. Some will push for a new replacement. The real problem is in broad daylight.

Fri, 06/24/2011 - 18:16 | 1399933 Itsalie
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moral hazard breeds lower and lower risk premia, widespread correlation of all assets and soon, (like now) all participants are locked up in a death embrace. Investors, pension funds, mutual/hedge/money-market/SWF/japanese Mssrs watanabes/bankstas, the whole lot - some providing liquidity, others providing leverage, yet others gambling pensioners' (401) and taxpayers' money. Oh, and those who believe the Bernank is somehow rendering patriotic service by printing money to wage war against the CCP or trying to destory euro, fat chance! They are all trapped in the titanic, sailing towards the invisible iceberg waiting to lurk. Its too late, there's no bailing out now.

Fri, 06/24/2011 - 21:25 | 1400282 RockyRacoon
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Moral hazard has been a problem before there was a phrase to describe it.

Go back to the guarantee of bank deposits, the FDIC.   Why should folks who have money in a bad bank have deposits guaranteed?   Folks would be keeping an eye on the goings-on in their banks if they were not lulled into a sense of security that the government would cover losses.   Fraud can be prosecuted if it happens, but cutting off the losses prevents discovery of wrong doing.  Look how the concept has morphed into the present banking system for proof.

If one is libertarian enough and fully for limited government, it must go the full monty and include all aspects of governmental meddling.

Fri, 06/24/2011 - 18:21 | 1399934 Fancy Bear
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Look at the weekly of the dow. We're about to leave the channel in place since March 09.

And about "TPTB". They're an illusion. There are people with epic power but don't delude yourself into thinking that they are omnipotent puppetmasters. Sure, they can often leverage things in their favor. But that's about it. Instead, what we're seeing is that greed and a corruptable system have created the emergent property of the appearance of a multigenerational plot to consolidate money and power and to reduce the global population aka TPTB.

To be clear: this situation is absolutely out the control of individuals and small groups.

If you need a good example of modern emergent phenomena, look up the TED talk "what technology wants."

The current global debt crisis is the result of "what crony-capitalism wants."

Fri, 06/24/2011 - 19:13 | 1400066 zaknick
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Well said, except it isn't a corruptible system but a thoroughly corrupt one since, at least, 1913.

It's gonna be one heck of a ride to see Amerika awakened from its morally corrupt "Roman Empire II" narcissism.

Yeehaaaw, bitches!

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