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Introducing Amoral Hazard
A vigilant reader points out that the biggest threat to markets these days is not moral hazard, which has been embraced by everyone and their grandmothers. It is that pesky "Amoral" version that is now raising eyebrows. To wit:
Put in a sentence.
------------(insert financial institution) exercised a great deal of amoral hazard when they collaborated with other funds to hasten the fall of __________ (pick a company or country) by shorting __________ (stock/cds/currency).
Because there surely would be no moral hazard be if there was no amoral hazard in the first place. Can we get rid of those pesky (efficient) markets altogether and just call for the Central Committee, aka the Fed, to run things with everyone's blessings? After all, they do so already.
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Got Gilts?
UK to issue USD-denominated government bonds. Ben?
http://jessescrossroadscafe.blogspot.com
And they do a damn fine job too. I mean what other institution runs with such strength and dignity that shows it to be one of the greatest America.. BWAHAHAHAHAA
Sorry, I just couldn't finish that with a straight face
First comes the theft and corruption, than comes the spin and propaganda deflecting blame and justifying actions. It's out of the most ancient of playbooks, which is constantly updated and refined but never thrown away.
Good point, CD.
After glancing at this commentary and your response, Thomas Jefferson's words raced across the corners of my mind.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."
Thomas Jefferson, 1802
America's great fall began in late December of 1913, when the private bank called the FED was illegally created.
An ancient playbook, indeed!
You couldnt make this up, The EU last week inacted a directive giving mothers 20 weeks paid leave I think its at 90% by law.
Its unbelievable anyway but in a depression its suicidal for jobs growth, Then blame the USD/Euro traders correctly going short the Euro.
The fault lies in the initial fraud in the creation of the instruments, and the insider trading on information, not on the act of short selling itself. I am myself a bear who often prefers the short side. But I do not create 'set ups' with a fraudulent basis, and then trade on that knowledge later after having placed the product with unsuspecting investors.
Surely the author realizes this, and is attempting to make a point by indirection that is not correct?
And the moral hazard follows, because these same financiers have corrupted the regulators of the system and the politicians as well. The hazard is that any losses sustained will be assumed by the public, so that the leveraged bets continue to assume ever greater risk profiles, until they collapse.
Its an old an familiar story really, at the heart of almost every great bubble and financial calamity.
It is unlikely that the financiers will be able to restrain themselves, being so overtaken by greed and a false sense of their own power. Then comes the increasingly important scapegoats, thrown to appease the mobs, and the violent reaction that shocks them. "What have we done to deserve this, we are only doing God's work!"
As Norman Mailer said, "There is a shitstorm coming."
That is true, the primary dealers and hedge funds to some extent have been enablers in this mess.
Greed is evil; it is one of the deadly sins. In fact, I've argued it's the basis of ALL the deadly sins:
what's lust, but greed for sex?
Wrath but greed for revenge,
Gluttony but greed for food,
You get the picture, all the others are similar, they're greed but for something more specific than simply inchoate avarice.
The USA embraces this evil as it's raison d'etre.
There is no moral hazard, as you say. The phrase is nonsense. But it isn't amoral either, nor a hazard. Amoral means it lies outside the sphere to which moral judgments apply, so since it's called "moral hazard", such judgment apparently does apply. No,It's simply Immorality raised to the level of a virtue.
Why do you think US citizens attack sexual peccadilloes so viciously, harping on their immorality? Because it allows them the luxury of seeing themselves as moral even as they bomb civilians from bunkers in Colorado and throw mothers with their children out onto the street.
Evil always needs to see itself as good.
It isn't; we aren't. We're so blinded by our own narcissism, that we've consciously, and by our own actions and definitions, become the Evil Empire we once branded another.
Oooh, a puzzle or sorts. Ok, i'll bite:
The USA Federal Reserve exercised a great deal of amoral hazard when they collaborated with other xxfundsxx central banks to hasten the fall of precious metal by shorting gold.
PS: The US Central Bank has ADMITTED to gold manipulation via swaps and other means. There is documentation on this PLUS testimony to the congress about them doing this.
Where is the CTFC as they have been made aware of this fact several times?
The university system is a nexus building machine, married to healthcare, and operated by DoD bureaucrats to the end of global cartels, including the banks. It’s a function of History. Back when open source operated within the university system, it was balanced.
Everyone not independently investing in their own community is working for the nexus, either by omission or commission. If you don’t like it, don’t feed it.
You need independent job certification, education, and access to the communication stream, which the nexus will do everything in its power to prevent, until it runs out of food.
The nexus is running out of food.
(Greenspan, Rubin , & Summers declawed the CTFC some time ago. I think a GS civil servant runs it now.)
Holy farking LOL
Amoral hazard.
:)
You found my funny bone, but did you have to keep pounding on it so hard?
Put in a sentence.
Sea World exercised a great deal of amoral hazard when they collaborated with other funds to hasten the fall of Red Lobster by shorting The Manson Family.
(I'm only twee years old!)
SWAPICUS: http://williambanzai7.blogspot.com/2010/03/swapicus.html
I had not yet heard Chanos speak and the 'frisking' of the hedge funds shorting activity on the euro.
Obviously I have much less problem with that. I was speaking to the role of Goldman and some of the Primary Dealers and their prop desks.
Now I understand this post a bit better.
The way to control the impact speculation has on the market is to manage leverage and capital requirements. Collusion is hard to prove, and it almost always require subpoenas and wiretaps. I think the action in the subpoenas is the warning shot across the hedge fund bows.
Anyway, with that distinction made, banning short selling is obviously crony capitalism, and reserved only for financial stocks and sovereign debt. LOL.
I got news for you: there's no such thing as Santa Claus, there's no such thing as the Easter Bunny and there's no such thing as an Efficient Market.
You know which economies are doing the best right now? Sweden, Denmark, Norway....social democracies with the highest tax burdens in the world.
You know how we got into this mess? Slavish adherence to the efficient market hypothesis (fallacy), along with an unquestioned faith in lower taxes. This all started with Howard Jarvis and Ronald Reagan. Reagan/Bush/Clinton/Bush gave you lower taxes, lower wages, less regulation and economic globalization, while "Bubbles" Greenspan was a truest of true believers. Clinton not only signed Graham Brierley Leach, he supported it along with a host of other Democrats.
Three decades later, your chickens have all come home to roost. California has fallen from a global economic powerhouse, to just another sovereign on the verge of collapse. While you look at what Jarvis and Greenspan have wrought in California, check out the CDS spreads on Sweden and Denmark.
If you want to use Iceland as a counterpoint, then go right ahead: because Iceland bet almost its entire economy on servicing the financial industry that your policies built. The same economic policies that built Goldman-Sachs.
Spare me the "They weren't practicing PURE capitalism" whine. True Believers in Communism still say "They weren't practicing PURE communism in the USSR".
Adults know that life is complicate and there are no simple answers. The answer isn’t pure unfettered markets. The answer isn’t pure socialism. The answer is an ever changing combination of free-enterprise along with government regulation and taxation. So grow up and stop believing in Santa Claus.
It's time to worry when Vito-Sachs takes out an insurance policy on your McMansion, leverages the policy 70 to 1, and then heads off to the flamethrower store. Anyone here support naked shorting?
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