2010 Contrarian Prediction of the Disastrous Consequences of ZIRP & Free Money Policy In the Banking System, Year 5Submitted by Reggie Middleton on 04/17/2015 09:41 -0500
In 2010, contrary to nearly every pundit, analyst and economist popularly published, I proclaimed ZIRP would starve the banks. Fast forward 5 years and banks are looking famished and things are getting worse 'casue more bailouts are coming before we finish ending the last bailout program (ZIRP) - The Federal Reserve has decided to let U.S. banks make limited use of municipal bonds to meet liquidity requirements
- Euro zone bond yields sink to historic lows (Reuters)
- Clinton Foundation to Keep Foreign Donors (WSJ)
- Russia says U.S. forced it to act on Ukraine (Reuters)
- Bankers to China's Rescue (BBG)
- Saudi Arabia Adds Half a Bakken to Global Oil Market in a Month (BBG)
- Valuations of Hong Kong's stock market operator go interstellar (Reuters)
- Switzerland Attracts Fewer Firms as Politics Hurt Business Image (BBG)
One Is a NeoCon Warmongering Crook ... The Other Is a NeoLib Warmongering Crook. See?? Totally Different!!!
Princeton University and former vice chairman of the Federal Reserve Alan Blinder unleashes his self-serving smorgasbord of Fed apologism in today's WSJ Op-Ed. The Fed should be patient-er for longer, he explains; and as far as the "loudly and frequently worried 'impatience crowd'," Blinder states, fears of policy "causing financial-market 'distortions' and bubbles might burst, causing untold damage to our economy," can apparently be ignored because, as he explains "none of the hypothesized financial hazards have surfaced." So - because we haven't crashed yet... policy is right - "This is a time to be patient."
If the government of Australia is concerned that their well-capitalized banking system needs a safety net and wants to tax deposits for such purpose, how in the world can we possibly expect the US and Europe, with all of their banking system risk, won’t do the same?
And against this disatsrous backdrop… investors are completely bullish!
"Now a legal quirk could bring a surreal ending to... foreclosure cases around the country: [borrowers] may get to keep their homes without ever having to pay another dime."
Ignoring the considerable risks in the mid 2000s led to the global financial crisis. Irish politicians, bankers and financial experts, like their international counterparts, are slow learners ...
*FISCHER SAYS RATE LIFTOFF LIKELY WARRANTED BEFORE END-2015
With the world now convinmced that Janet Yellen is as dovish as she has ever been on rate hikes, today comes the first post-FOMC speech. None other than Vice-chair Stanley Fischer is due to address The Economic Club of New York on the topic of "Monetary-policy lessons and the way ahead." As Art Cashin warned this morning, Fischer "seems to feel that the Fed must raise rates this year. He is also the only Fed official to concede that any rate hike will be different than any seen before."
Something curious has emerged as a result of the divergent "Fed-vs-Everyone-Else" central bank policy: as JPM observed over the weekend while looking at the dollar fx basis, the dollar funding shortage is back with a vengeance, and is accelerating at pace not seen since the Lehman collapse.
For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.
Recency bias no doubt once again playing a role, but more likely it is this new-ish trend to deny any damaging economic possibility as it might disrupt the balance of financialism. Any system that cannot even countenance just a small possibility of contrary thought is not robust or “resilient” at all. As we saw in 2008-09, oil liquidations were entirely appropriate for economic conditions; how can “everyone” deny outright something even slightly similar?
Janet Yellen is very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created. During testimony this week, she made “central bank independence” sound like it was the holy grail. Even though every other government function is debated politically in this country, Janet Yellen insists that what the Federal Reserve does is “too important” to be influenced by the American people. Does any other government agency ever dare to make that claim? If the Fed is doing everything correctly, why should Yellen be alarmed? What does she have to hide?
As a frequent contributor to Bloomberg, I would welcome the opportunity to debate this with Barry.
What say you @ritholtz ? : )
Jon Corzine had an illustrious career in investment banking, rising to the very top of Goldman Sachs, until he got pushed out in 1999. He subsequently decided to try his luck in politics, and was eventually elected as a Senator from New Jersey in 2001, then Governor in 2006. After losing to Chris Christie in 2010, Corzine was promptly hired as the CEO of MF Global. He was back in the game of finance - and with something to prove. While the majority of voters in New Jersey breathed a sigh of relief, the clients of MF Global could not imagine the disaster that would unfold.