Charting The Latest Iteration Of Moral Hazard

Tyler Durden's picture

Since this chart from the WSJ sums up petty much everything about the "efficient market hypothesis" or whatever it is those wacky Chicago PhD's call their multi-variable, self-similar, Lorenzian "strange attractor" equations that describe human irrationality to the dot, there is little need for commentary (those who wish to do so, can read more about it at "Fed Faces Old Foe as Hazard Returns")

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ratso's picture

Chicago Ph.D. ?? I think not.  Sounds much more like mutual fund salesmen blather to justify marginal returns for high management fees; sounds more like Smith Barney and Merrill Lynch lying their way into your pocket.   

IBelieveInMagic's picture

Despite the gnashing of teeth, hasn't the USD enabled consumption been great -- all the Fed/US Treas/EU effort is to keep it going a little longer -- the real losers are the population in the commodity rich/defenceless countries who have disgorged their natural wealth for bits and papers!

All the rest is just hypocricy and denial...

Dick Fitz's picture

"the real losers are the population in the commodity rich/defenceless countries who have disgorged their natural wealth for bits and papers!"

That's the scariest part- we've exported inflation (in the form of worthless bits of paper and data entries) while importing real goods, like oil, iPhones and Barbie dolls. When that tide turns- and we can see the waves lapping at the shore today- we are going to see the value of the dollar plummet in value in a manner unseen in history. One day soon, dollar holders overseas are going to see the writing on the wall, and the slow trickle of repatriated dollars will become a flood. No one wants to be left holding the bag. The governments that hold US debt will be loathe to do it- they know that when they do they will have to revalue their "marked to fantasy" US holdings, which will hurt their economy- but when the dam breaks, it will be better to lose 50% of their value than 99%. The loss in value will be swift, and will devastate the US (and world) economy.

That day is fast approaching, and I fear it's going to be sooner than we think...

Fish Gone Bad's picture

In a democracy, the 51% pretty much make the rules for everyone, including the 49% who dissagree.  There is a problem when the majority wants to enact some law over the minority though.  This has been seen in voting rights for blacks, women, and other disinfranchised peoples.  So now we get to see what happens when the "young people" who did not vote to give out money, finally get a voice.  Ron Paul will be the front man for that voice screaming, "It's not my debt!!!" 

TruthInSunshine's picture

In a democracy, the 51% pretty much make the rules for everyone


We don't have a democracy NOR a republic.

We REALLY DO have a kleptocracy  whereby 0.1% make the rules for everyone, and the system is hopelessly broken.

Ask any politician or regulator in government who really owns them (and then ignore their response & FOLLOW THE MONEY).

Idiocracy's picture

Exactly.  Let's all us ZH posters agree to agree that the US of A is not a democracy.  That's the low-hanging fruit, in terms of thought work.  

Reasonable prefixes to join with "ocracy" in the context of the USA are "plut-" "klept-" "idi-" and the like.  

Leopold B. Scotch's picture

Yeah.. the 0.1% really were chomping at the bit for a vastly expaneded Healthcare Welfare program. (Let's not call this insurance.)

Pants McPants's picture

I think you mean 51% of voters.  When you consider elections have very low turnout the actual "lawmaking" arm of the voting population is quite small.

Ying-Yang's picture

Good catch Ahmeexnal... The 2nd link is a good watch for Ron Paul debunkers. Fox spent serious time with Paul to allow hime to make some points. He is right about FEMA if debunkers think about what he is saying. He is not a JFK, Clinton or Reagan when it comes to excitement but his message is spot on if you want this country to get back on track.


RockyRacoon's picture

Ron Paul: "FEMA creates many of our problems because they sell the insurance because you can't buy it from a private company, which means there's a lot of danger, so we pay people to build on beaches, and then we have to go and rescue them," he said.

There is the nuclear industry in a nutshell as well.   What insurance company would cover a nuclear power plant?   Look at the Japanese debacle....   So, the gov't insures them and that creates moral hazard.   If private insurers were on the hook the maintenance and upgrades would have to be done to prevent "accidents".   But no, these things cost money and the cost of the electricity to the end user would go up.   So, government is subsidizing YOUR power costs.   Moral hazard at work.

Confused's picture

I fear that the good doctor will be co-opted once TPTB realize the support he is capable of obtaining. 


Let me be clear. I do not think that Ron Paul will compromise. But I think it would be hard to resist getting swallowed up by them once they decide to endorse him in some fashion. Easier to direct his course, then to let him do his thing. 

TBT or not TBT's picture

And our government will collapse.


trampstamp's picture

Nothing wrong making some money going long to the bottom.

Eireann go Brach's picture

Hope and change at it's finest!

hardcleareye's picture

Yes sir, but behind door two was McCain/Palin   (Deep sigh, shaking head,)  

RockyRacoon's picture

Upside:  This train would be fully wrecked by now.   That's the optimistic view.

PulauHantu29's picture

"No one saw this coming," they testitifed.....

TruthInSunshine's picture

OT, but OH SO Worth it:

In the mean time, The New York Times (of all papers), comes out with a major piece by Grethchen Morgensen, saying "oh noes! The bailouts didn't help Main Street, and Paulson, Geithner & Bernanke have lied to the American People" -

- but wait for it; Morgensen says the Bernank WILL DO IT AGAIN, but that this may be a "tough sell" to the American People.


The best part of this article is having a former Cleveland Federal Reserve Attorney spill the beans on the SHAM & SCAM & RACKETEERING OUTFIT THAT IS THE FEDERAL RESERVE (down with The Fed & ALL FIATSKI-FRACTIONAL RESERVE PONZIS).


Published: August 27, 2011

FOR the last three years we have been told repeatedly by government officials that funneling hundreds of billions of dollars to large and teetering banks during the credit crisis was necessary to save the financial system, and beneficial to Main Street.

But this has been a hard sell to an increasingly skeptical public. As Henry M. Paulson Jr., the former Treasury secretary, told the Financial Crisis Inquiry Commission back in May 2010, “I was never able to explain to the American people in a way in which they understood it why these rescues were for them and for their benefit, not for Wall Street.”

The American people were right to question Mr. Paulson’s pitch, as it turns out. And that became clearer than ever last week when Bloomberg News published fresh and disturbing details about the crisis-era bailouts.

Based on information generated by Freedom of Information Act requests and its longstanding lawsuit against the Federal Reserve board, Bloomberg reported that the Fed had provided a stunning $1.2 trillion to large global financial institutions at the peak of its crisis lending in December 2008.

The Rescue That Missed Main Street



TruthInSunshine's picture

It's shortened, now, by magic.

I didn't edit it. Ghost in the Machine.

PulauHantu29's picture

Excellent post. I am reading her book now...excellent also ....a little depressing.....

KennyG09's picture

"But fiat paper money also creates moral hazard for the money users — the citizens, the banks, and the governments — because they sooner or later realize that the masters of the printing press have the power to bail out any bankrupt firm or government. They engage in reckless financial planning, expecting that the monetary authorities will not allow too many reckless planners to go bankrupt. This speculation has been borne out by the last thirty years. Public and private debts are at record heights all over the world."

wisefool's picture

Snarkasm Flashback to the 'aughts.

"But if we sent you a $600 stimulus check, $1800 if you aint a homo, would you join us? How about we throw in the ole' secretary of treasury spot?"

Monetary is Central banks. They fired every wad they have. Fiscal is politicians and there are many more pages to add to the tax code to get this economy going good and proper. My point is many of us sound money advocates on ZH and other places are not adressing the particular printing press causing the true problems.

malikai's picture

Yes, but with sound money, the only way the .gov can spend money is by direct taxation. Taxation which is burdensome and unpopular will make politicos think twice before handing out the fruits of their constituent's labor to their pals. Furthermore, when people directly experience the negative effects (taxation, null results) of the latest and greatest porkulous, they'll probably think twice before electing Mr. Promises and probably think twice before shunning Mr. Reality.

DeadFred's picture

Nothing changed, just some nebulous words, The market goes where it's told to go when volume is low. The robots will pump it up again so we can make more money going down again through the same territory. Do they publish a chart of when they will tell the bots to move down? (sarcasm). Not sarcasm is where is the best place to check on how short the market is because my guess is the market will turn down when 'they' determine there are enough sheep on board to the rally-express to be worth shearing.

unununium's picture

It's easy to know when it will go down.  Right after they ban shorting.

krispkritter's picture

Wondering why all these graphs don't show a downline ending in a big swirling toilet bowl? Banzai? Fuck 'Moral Hazard', I want Turdbowl 'Punch In the Face' Hazard. Something that gets the attention of the electorate and gets some meaningful change underway, whether with dropped Chads or Chads with UZI's. Otherwise who cares what the 'hazard' is? It's going to end the same way if not. Screw the system that has been screwing us. All you assbags that voted for 'Change', here's your chance to redeem yourselves; light yourself on fire and go hug your favorite elected official. A nice warm hug will do. You're obviously too brain deficient to be worthwhile to those that saw through the smoke and mirrors...

hardcleareye's picture

You may want to consider increasing your meds. 

krispkritter's picture

Nah, can't afford them. Beer works fine. Just venting after a weekend of listening to friends/relatives and reading posts of Obamanaut apologists singing the praises for O's magnificient handling of a 'historic hurricane' and psycho-babble on his handling of the economy and how Irene will give a boost to the economy thanks to the almighty O'. Try explaining the Broken Window Fallacy to the Progressive-minded. The storm cleanup hasn't even started and the '...if this is O's Katrina, he did WAY better than Bushy...' is being spewed.  Had already read/saw RP's stuff on Fox(oops) and it just set me off.  The title bar on the chart says 'hopes, hopes, hopes' which pretty much says it all about this economy. Everyone 'hoping' things will work out but not many seem to be doing much about it. RP is, always has been, the voice of reason and even here he gets panned regularly, sometimes by those who admit to voting for Obama on the premise that the 'Hope and Change' thingy would work out for them. What a laugh. And how pathetic. Had they backed RP maybe the dead horse that was McCain wouldn't have been resurrected so easily and there would have been a viable alternative in '08. Nah, still probably wouldn't have worked but at least you could say you didn't vote for the current DIC (Disaster In Chief) in the WH. I stopped talking prepping, PM's, and politics with these people years ago and now I can't even get through hurricane season without more endless blathering on how O' is helping US 'recover' from one thing or another. Actually I take back my initial statement and will just stick my head in the toilet bowl and give myself a swirly. It'll cool me off, wash some of the BS from my ears, and prevent me from hearing anymore of these whiners for a brief moment...and to the 6 downers, if you voted for O, fuck you. If not, thanks...

RockyRacoon's picture

Nice rant!   The only caveat I'd add is that we really don't know where we'd be without the onslaught of "stimulus" and all the other money thrown at the problems.   I'd rather have had the money not spent at all, but it is impossible to prove the proverbial negative.   If the wasted money spend on the oligarchs has done anything at all it has allowed me extra time to buy the precious metals that I'll hold through the coming maelstrom.   I can be thankful for that at least.

darkstar7646's picture

People had better start understanding how many voters there are going to be in next year's election that truly want the opposition _dead_. Not defeated, and not just the politicians. Dead, and including the voters too.

We're headed for probably a Corn-pone Hitler (as Kunstler puts it), which describes the Republicans well.

(And that's if we (and I don't think we will) get that far.)

IMA5U's picture

it's a kommunist market.  when the government wants you to take risk, take risk.  and when they want the market to crash, they let it

Cursive's picture

What, they couldn't have worked "Bernanke Put" into the copybook heading?

RobotTrader's picture

Asia is up

ES is up tonight

Could be a big day tomorrow.

Subprime JD's picture

Robo you strangely disappeared during the big selloff

hardcleareye's picture

Yeah Robo we missed you, no one to bust on....


TruthInSunshine's picture

Hey RoboWanker, it may take a few days to get a big sell off so you go into hiding again, but at least you'll go into hiding again.

Now give me my cash, teller boy.

malikai's picture

Don't be so hard on him. I for one, appreciate his dumb money indications.

lizzy36's picture

or the dax could trade down another 3%.

its a crap shoot. not a market.

DeadFred's picture

There must be wailing and gnashing of teeth for the FOMC meeting to provide cover. The crystal ball ball is a bit fuzzy in the short term but the wailing and gnashing as Bennie walks into the meeting that's something I'm betting on. How high can it rally short term and still have the required angst in three weeks? Not very.

chump666's picture

this is a suckers rally...the market will short insurance/banks/transport/retail...everything.  reparitation trade after a disaster.

could be wrong, or i could be right.

chump666's picture

but I think I am right, EZ endgame is creeping up

Shineola's picture

The real hazard comes when you breathe your last breath and go to your final accounting.

chartcruzer's picture

with a bit more detail[s206018187]&disp=P

the last stimulus (QE2) produced little stock market gains and virtually zero economic progress.    Imagine what happens to the markets when QE3 proves that printing can not cure a debt loaded economy?

zorba THE GREEK's picture

In a rigged casino, always bet with the house. Better yet, stay out of the casino.

unununium's picture

> In a rigged casino, always bet with the house.

You can't even do that in a regular casino.