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Stephen Roach Explains How The Fed Is Pulling The Wool Over Our Eyes

Tyler Durden's picture


"Bernanke is betting the ranch on open-ended QE and zero interest rates and it worries me" is how Stephen Roach of Morgan Stanley starts this must-see reality-check interview with Bloomberg TV's Tom Keene. The reason for his concern is simple, the current Fed modus operandi is a framework for rescuing economies in crisis but does little to sustain economic recovery. Roach agrees with Cal's Eichengreen that the European and US central banks are indeed in a policy trap, committed to a path of action that has to be perpetually ante'd up to maintain the dream. With Europe in recession already in his view, Roach does not expect the tough structural action until we see greater social unrest or overwhelming unemployment and reminds us of how close we got when Greece threatened the referendum in the late summer. He goes on to discuss China (positive on their efforts and 'solid strategy') and it's relative success as a regime which he contrasts with our "central bankers who pull the wool over our eyes with ZIRP and magical QE". Taking on the mistakes of Greenspan, letting capitalism go unchecked, and his incredulity at the 'glide-path' charts we were treated to yesterday by the Fed's bankers ('accountability'), Roach sees the painful process of deleveraging from excess debt, insufficient savings, and over-consumption as likely to take a long time as we should not assume investment will be the driver as Obama goes 'protectionist' (in the SOTU) on our 3rd largest export partner - yes, China.




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Thu, 01/26/2012 - 18:11 | 2101011 redpill
redpill's picture

Makes you feel a little QEasy doesn't it?

Thu, 01/26/2012 - 18:18 | 2101031 Future Tense
Future Tense's picture

QEasy?  Makes me feel excellent. The Fed's speech yesterday was a gift to precious metals.  The second best gift of the month was given to anyone who took advantage of the Sprott PSLV NAV compression.  Here is a good article discussing the NAV, which you now have to think about when making buying decisions.

Thu, 01/26/2012 - 18:38 | 2101079 DavidPierre
DavidPierre's picture

The "MANIA" stage.


The action in precious metals yesterday was significant and the 3rd and final "mania stage" has been kicked off.

First look at the fundamentals. The Fed told that they will foster a policy of negative ... if they could create negative nominal rates they would... real interest rates for 2 more years. Watch reported ... fake... inventories of precious metals continue to drop. Central banks have become buyers of Gold. In the U.S. and Canada, sales of 1 oz. coins are now running at a faster pace than TOTAL production of all mines combined. Silver inventories in the U.S. and Canadian mints are nonexistent. If these coins are to be minted, the mints become buyers. Nevermind industrial demand, jewelry demand, investment demand of bullion bars or anything else, the sales of 1oz. coins are eating up all supply.

Then of course "rehypothecation" to the tune of over 100-1 in all sorts of scam paper products from ETF's to futures, options, pool accounts etc. To add to the "perfectness" of this storm, Sprott Asset Management pulled the trigger on a 10 million ounce order with another $1.2 Billion remaining shelved for future purchases.

Let's not forget the biggest "fundamental" of all, good 'ole common sense.

Common sense tells you that while governments are getting stuck in the quicksand of bankruptcy the natural action of "protect oneself" has the demand of precious metals exploding. Remember that 5 years ago, nearly no one differentiated between the fraudulent paper Gold and Silver products and the real thing. This siphoned real demand away from the real thing, this is changing rapidly and enough "big money" finally "gets it"!

So fundamentally, the perfect storm has arrive. Technically or "psychologically" the set up is equally bullish. Just one month ago the average investors in PM's were suicidal to put it mildly. Short positions... many naked and illegal... in the mining shares ballooned and COT numbers show the commercials less short and the specs less long than in many a moon. Bullish consensus numbers got as low or lower than the bottom days in 2008 while "cash for Gold" shops spring up like lemonade stands. The mental malaise or funk did exist and shook many investors off the bull. If you hung in there, you deserve to pat yourself on the back because NOW it looks like you are going to really get paid for your pain!

Jim Sinclair put a piece out last night...

... where he says that "mainstream entities will enter the Gold market". He is absolutely correct and will be joined by "The Public". The public will have a much larger impact on the Silver market ... poor man's Gold... while institutions will devour Gold itself. Let's not forget India's "Gold for oil" deal and other major countries like China, Russia, France etc. setting up trade deals without using the Dollar for settlement.

The Sun is setting on the Dollar!

ALL of this has come together at the same time to create a perfect storm that just happened to kick off the day before an options expiration that surely has the shorts licking their wounds! The "2% rule" was soundly broken yesterday with an outside reversal day, the size of which has not been seen throughout the 11 year bull market.

Yesterday saw a bottom to top move of well over $60.


We are also getting upside follow through today which has NEVER happened ... been "allowed" ... in the past. Something is different now. Whether "they" have lost control or "allowed" yesterdays movement is a moot point because it "happened" and the genie cannot be put back into the bottle!

Bill Murphy says that "price action makes market commentary". It will now begin to work in favor of precious metals as opposed to against. The 3rd and final "mania stage " has kicked off. In the words of Richard Russell, "there is no fever like Gold fever" and that is in "normal times". These are not even close to normal times. We are living through the end of an era where governments are going broke including the issuer of "the money". "The money" has gone bad at the same time investors own little or no "real money". Years of brainwashing. Capital has been concentrated at one side of the ship and has very slowly been moving back to the empty side.

It has taken 11 years to get where we are today, it could very well only take one more year to clean up "all the marbles". What lies ahead price wise is anyone's guess.

We could very well see a double, a ten fold, a 100 fold OR an "infinite move" in Dollar terms if the Dollar is lost. A "revaluation" of paper money vs. real money is mandatory and has been necessary for a very long time.

THIS is it!

The "revaluation" that has been working it's way through for the last 11 years has changed gears and with today's abilities of information and leverage ... options, futures and OTC crap... has an additional boost! The computerized turbos and leveraged nitrous buttons will make what is to come in Gold and Silver legendary stories that will make the Dot Com/housing booms look like 2 pimples on an elephant's arse.

The biggest "difference" is that there will be no crash to follow the boom. When a currency dies ... ALL paper currencies... real money steps in and is "valued" to whatever new currency that is introduced. Or at least this is the way they would like you to perceive it, the reality is that the new currencies are valued by how much Gold or Silver they can "buy".

The important thing is that whenever a new currency is introduced, anyone sitting at the table with real money, ALREADY has "all the marbles". You will be entering the "next monetary system" wealth intact AND enhanced!

"Payday" is much closer than many expect.

This is the start.

Thu, 01/26/2012 - 19:03 | 2101129 NuYawkFrankie
NuYawkFrankie's picture

Re. THIS is it! ....This is the start

Zzzzzzzzz..... Zzzzzz... Zzz...

Thu, 01/26/2012 - 20:10 | 2101291 gmrpeabody
gmrpeabody's picture

+1... too funny

This rocket is taking off....

The train is leaving the station...

To the moon...

Sorry if I left one out, but most of us have heard all of this before. The only thing I really expect is the unexpected. Hope for the best, but be ready for the worst.

Thu, 01/26/2012 - 20:12 | 2101297 gmrpeabody
gmrpeabody's picture

And yes, the fundamentals are on gold's side..., but yesterday was too easy. Really..., I smell a rat.

Thu, 01/26/2012 - 20:33 | 2101339 Michael
Michael's picture

Iceland explains the proper procedure for dealing with unruly international banksters.

 Iceland Declares Independence from International Banks

By Bill Wilson – Iceland is free.  And it will remain so, so long as her people wish to remain autonomous of the foreign domination of her would-be masters — in this case, international bankers.

On April 9, the fiercely independent people of island-nation defeated a referendum that would have bailed out the UK and the Netherlands who had covered the deposits of British and Dutch investors who had lost funds in Icesave bank in 2008.

At the time of the bank’s failure, Iceland refused to cover the losses.  But the UK and Netherlands nonetheless have demanded that Iceland repay them for the “loan” as a condition for admission into the European Union.

In response, the Icelandic people have told Europe to go pound sand. The final vote was 103,207 to 69,462, or 58.9 percent to 39.7 percent.   “Taxpayers should not be responsible for paying the debts of a private institution,” said Sigriur Andersen, a spokeswoman for the Advice group that opposed the bailout.

A similar referendum in 2009 on the issue, although with harsher terms, found 93.2 percent of the Icelandic electorate rejecting a proposal to guarantee the deposits of foreign investors who had funds in the Icelandic bank. The referendum was invoked when President Olafur Ragnur Grimmson vetoed legislation the Althingi, Iceland’s parliament, had passed to pay back the British and Dutch.


Fri, 01/27/2012 - 01:21 | 2101745 flacon
flacon's picture

Who is the masculine looking sorority girl who obviously has been scraming all night at the dance clubs with the fucking big fucking glasses who is interviewing that short dude? Oh... shit! never mind.... sheena was a MAN! FUUUUCK!


And was that Jamie Dimon I saw in the infomercial ? Holy fucking shit! He speaks English like he was an American! I always thought he was some kind of friggin foreigner. Thank God JP Morgan is run by an American, I was getting scared for a moment. USA! USA! USA! USA! lol!

Fri, 01/27/2012 - 01:22 | 2101755 trav7777
trav7777's picture

Who cares what some goddamned economist like Roach says?

None of this shit MATTERS.  OIL MATTERS.

The banker idiots keep insisting the problem is somehow that the numbers on these ledgers are altering physical reality.  WTF does it matter what the USG's national debt is or the Fed's balance sheet?  It could be eleventy kabillion...makes no fucking difference at all.

Fri, 01/27/2012 - 01:26 | 2101756 flacon
flacon's picture

This is what the homosexuals at Davos are discussing: 


> "Sessions will range from scientific discoveries expected to shape 2012, to a discussion on the differences perceived when a Beethoven sonata is played on historic and modern instruments, to how virtual games can be harnessed for innovation in the real world." 

Great! Fuckin' great! We get to learn about fret boards and strings. I know the Romans provided bread and circuses, but did they also talk about Martha Stewart's latest recepie and how adding too much beer to your diet can lead to beer goggles? Highyly unlikely. That's why we are better than every one else. We absolutely Rule! Now... where's my pen to sign this credit card statement?! 


Fri, 01/27/2012 - 01:20 | 2101749 trav7777
trav7777's picture

I may just have to move there

Thu, 01/26/2012 - 20:30 | 2101332 spinone
spinone's picture

Don't confuse volatility for mania.  Its more like manic pression.  Pick your entry points.

Fri, 01/27/2012 - 00:56 | 2101720 The Monkey
The Monkey's picture

Mania is right. The Fed has pursued reflative policies aimed at stable prices via the conduit of credit expansion. Whatever your hard asset flavor, the prices have been distorted. This mean more incentive to grow supply and more manic games for the greater fool.

Doesn't matter what your flavor your asset. In this enviroment no one knows what the true value of ANYTHING. Things we do know:

--Credit extended is near is all time highs.
--Personal savings is near it's all time lows.
--Real household income shrank by 3% in 2011.
--Housing is continuing to deflate.
--Distorted high prices lead to oversupply, overproduction and gluts.

The whole credit ponzi game is nearing an end. How much more do we have to go before deleveraging must begin in earnest form? At best, we have about 100 more basis points in the 30 year treasury and the Fed's games with nominal interest rates are fully cooked (i.e. no more refinancing stimulus, no more new marginal buyers taking advantage of lower rates, because they will have bottomed).

Then, we probably get something nearly no one expects, rising interest rates in the form of DEFLATION. Take the effect of falling nominal rates and refinaning out of the equation and the velocity of money will fall. There is nothing the Fed can do to stop it.

Sat, 01/28/2012 - 00:57 | 2104941 JeffB
JeffB's picture

"Then, we probably get something nearly no one expects, rising interest rates in the form of DEFLATION. Take the effect of falling nominal rates and refinaning out of the equation and the velocity of money will fall. There is nothing the Fed can do to stop it."


Couldn't they stop it with inflation, or hyper-inflation?


Mon, 01/30/2012 - 21:59 | 2111544 The Monkey
The Monkey's picture

Why would you want to stop it with hyperinflation? A 2% annual deflation should do the trick. Let's say 3% with some public sector deleveraging. This is what happened during the Long Depression in the late 19th century. When you get right down to it, a lengthy shallow deflation beats hyperinflation anyday. At some point, a period of falling prices will be offered up in the Fed's debate if it has not already.

Betting on Bernanke is a sucker's bet. We have a long way to go to fully deleverage. Longer than politically tenable for the Federal Reserve's existing policies.

Tue, 01/31/2012 - 10:29 | 2112518 JeffB
JeffB's picture

"Why would you want to stop it with hyperinflation?"


I didn't mean they would want hyperinflation, nor deliberately cause it. I think it is a possibility, though, if things get away from them. I believe Bernanke has stated publicly that the Fed had the power to prevent deflation via the printing press, and I suspect that is their strategy. It is what seems to make the most sense to me. In any event, I was disagreeing with this sentence in the post above mine:

"Take the effect of falling nominal rates and refinaning out of the equation and the velocity of money will fall. There is nothing the Fed can do to stop it."


I think it is within the Fed's power to prevent deflation if they want to. Printing more money should do the trick.

A long slow deflation might be a viable option under some circumstances, but this doesn't seem to be one of them from my point of view. Why would they want deflation when the U.S. is largest debtor nation in the history of the world? That just makes the real value of our debts that much larger. A long slow inflation that exceeds the nominal interest rates would seem to be the ideal they would be aiming for. It would reduce the value of the debts we already owe.

That may be easier said than done, but that would be the strategy I expect they would attempt anyway.


Fri, 01/27/2012 - 04:14 | 2101888 cranky-old-geezer
cranky-old-geezer's picture



ALL of this has come together at the same time to create a perfect storm that just happened to kick off the day before an options expiration that surely has the shorts licking their wounds! The "2% rule" was soundly broken yesterday with an outside reversal day, the size of which has not been seen throughout the 11 year bull market.

Yesterday saw a bottom to top move of well over $60.

We are also getting upside follow through today which has NEVER happened ... been "allowed" ... in the past.

I noticed it too, the normal hammering of gold / silver into opex DIDN'T HAPPEN this time.

The Sun is setting on the Dollar!

Yes, I believe it (finally) is.

I beleive Russia / China / India telling USD fuck off, they're buying Iranian oil in their respective currencies (and gold?), is the catalyst for this perfect strom of confidence collapse in USD and flight to gold / silver.

Great summary of this sea change ...if you understand the significance of that phrase.

Fri, 01/27/2012 - 05:22 | 2101911 StychoKiller
StychoKiller's picture

The Sun is setting on the Dollar!

ALL of this has come together at the same time to create a perfect storm that just happened to kick off the day before an options expiration that surely has the shorts licking their wounds! The "2% rule" was soundly broken yesterday with an outside reversal day, the size of which has not been seen throughout the 11 year bull market.

Excerpted from:


The USDollar ship of sea is adrift, soon a derelict vessel.  The signs are clear. The sovereign debt system that serves as foundation is a rotting corpse.  The East is working feverishly to build the alternative system.  Look for barter to be its backbone.  By the Ides of March, it should be more clear.  Any controlled demolition of PIIGS debt and bond writedowns will make for quite the event to watch.  The upcoming funding needs of Italy are an order of magnitude greater than the bond market or the Euro Central Bank can manage.  The game breaker events are nigh.  Just this week, India and Iran announced settlement of oil trade in gold bullion. The workaround seems unique and novel, but with historical precedent.  Before the USGovt unilaterally broke the Bretton Woods Accord that established the Dollar Gold Standard, settlement in gold was the norm.  The world might be soon coming full circle.


Thu, 01/26/2012 - 20:06 | 2101279 Whatta
Whatta's picture

The second best gift of the month was given to anyone who took advantage of the Sprott PSLV NAV compression.


I bought long shares of PSLV at 13.22, sold puts on SLV, and added a roll of Kookaburra's just for fun....well ahead on all of them already.

Thu, 01/26/2012 - 18:45 | 2101094 HD
HD's picture

I enjoyed that redpill

Thu, 01/26/2012 - 18:50 | 2101104 Don Birnam
Don Birnam's picture

Roach is decrying central bankers from within the posh, moneyed confines of Davos ? Plutocratic heresy, taking his peers to task. Stephen had better attenuate the rhetoric, lest he be condemned by the Lord High Justice Soros, to be put to the stake atop a pyre of conflagrating fiat.

Fri, 01/27/2012 - 02:52 | 2101845 The Monkey
The Monkey's picture

Over the next two years, ZeroHedge will be taken over by deflationists. Gold bugs need to find a new home.

Fri, 01/27/2012 - 03:19 | 2101865 akak
akak's picture

Over the next two years, the remaining few deflationary flat-earthers will have their much-abused anal sphincters handed to them on a silver (and gold) platter.

Fri, 01/27/2012 - 05:25 | 2101912 StychoKiller
StychoKiller's picture

"deflationary flat-earthers"  are right in that the VALUE of FRNs/Euros/etc. will deflate, but WRONG in that the QUANTITY of FRNs/Euros/etc. will explode exponentially!

Mon, 01/30/2012 - 22:03 | 2111552 The Monkey
The Monkey's picture

We'll see. No one has a crystal ball, but I think there are more than a few people here that are fixing to be surprised when the Fed's actions become impotent and politically unacceptable.

Time will tell, as always.

Fri, 01/27/2012 - 00:16 | 2101678 gravedestruction
gravedestruction's picture

"Makes you feel a little QEasy doesn't it?"

Quantitatively of course.

Really liked the "Chart-a-Palusa"

Thu, 01/26/2012 - 18:15 | 2101025 meatball
meatball's picture

So far, whatever they did has been working, if you have lots of money in the market.


If you (the poor and the middle class) have little in the market and you are taking a much bigger hit at the stores and the gas pumps, oooops.

Thu, 01/26/2012 - 18:21 | 2101038 A Lunatic
A Lunatic's picture

The new rule of thumb will be, for every five hundred points of market gains, the price of a loaf of bread will double.

Thu, 01/26/2012 - 19:06 | 2101134 XitSam
XitSam's picture

I bake my own bread.

Thu, 01/26/2012 - 19:35 | 2101213 xela2200
xela2200's picture

Then you, sir, are a terrorist.

Thu, 01/26/2012 - 18:23 | 2101043 jcaz
jcaz's picture

Has it been working? 

Inflating stock prices does nothing-  just misdirects the simpletons.

That's the only tool Bernanke has left.



Thu, 01/26/2012 - 18:29 | 2101054 brewing
brewing's picture

middle (class) squeeze... rising inflation and low savings rates...

Thu, 01/26/2012 - 21:31 | 2101440 Pitchman
Pitchman's picture

The ongoing saga of saving the TBTF Banks while leaving the real economy to wilt on the vine continues as Bernanke pegs inflation at 2%.... further economic damage will eventually lead to a strong public reaction and constructive change, albeit via a highly troubled and sometimes dangerous path.... - Keep Bailing


Fri, 01/27/2012 - 01:10 | 2101739 The Monkey
The Monkey's picture

Working in the same way another heroine shot works for an addict. Bernanke is pursuing policies that mislead pension funds, private investors and Grandma. These destructive policies will be the Fed's undoing.

Thu, 01/26/2012 - 18:17 | 2101028 Let them eat iPads
Let them eat iPads's picture

Why are they sitting outside in the cold?

Thu, 01/26/2012 - 18:36 | 2101078 TheDriver
TheDriver's picture

It's not cold there. There are piles of burning fiat just off camera keeping their feet warm.

Thu, 01/26/2012 - 18:49 | 2101093 akak
akak's picture

Being closet goldbugs, they were counting on cold-induced shrinkage to hide their QE boners from the camera.

Thu, 01/26/2012 - 18:18 | 2101032 Money never sleeps
Money never sleeps's picture

Bernanke trades at this place: Do not tell anybody.

Thu, 01/26/2012 - 18:23 | 2101042 mattu13048
mattu13048's picture

Armada Markets IPO is the next big thing in Europe.

Thu, 01/26/2012 - 18:19 | 2101034 VelvetHog
VelvetHog's picture

Classic Ponzi.

Thu, 01/26/2012 - 19:09 | 2101133 NuYawkFrankie
NuYawkFrankie's picture

Cherry Ponzi!

Thu, 01/26/2012 - 18:25 | 2101047 eucalyptus
eucalyptus's picture

Tom Keene Surveillance Midday is IMO the best financial show on any of the cable networks.

Reggie needs to go on it. 

Thu, 01/26/2012 - 18:44 | 2101081 NuYawkFrankie
NuYawkFrankie's picture

The show runs at midday? 

Aw schuks! I'm usually crackin' open my first brew o' the day & watching Cougartown re-runs at that time!

Thu, 01/26/2012 - 18:26 | 2101049 SillySalesmanQu...
SillySalesmanQuestion's picture

Were those "glide-path charts" cleared and approved by the FAA...? Tower...we have a small problem. We're burning through our jet fuel much faster than our flow charts show we should be...?

Fri, 01/27/2012 - 05:31 | 2101914 StychoKiller
StychoKiller's picture

More cowbell! (oops, I mean...)thrust!  The Fiat Mountain range is dead ahead and closing fast -- WE NEED ALTITUDE!

Thu, 01/26/2012 - 18:28 | 2101053 hannah
hannah's picture

china is 'solid'....right.

Thu, 01/26/2012 - 18:49 | 2101099 vast-dom
vast-dom's picture

china policy is exact opposite of what US/Eurozone has done to date. the sinkhole nation may stay somewhat more solvent as the west folds...

Thu, 01/26/2012 - 18:29 | 2101055 Melin
Melin's picture

"letting capitalism go unchecked"

"Failing to let Capitalism bring prosperity as it does when left unchecked"

There.  Fixed it for you.

Thu, 01/26/2012 - 22:24 | 2101526 jplotinus
jplotinus's picture

""Failing to let Capitalism bring prosperity as it does when left unchecked"
There.  Fixed it for you."

Wait. The above quote is a specimen quality of genus 'cognitiveum dissonanceism.'

Capitalism has been unchecked in recent decades. Greed was good. Capitalism failed in the US all on its own.

Here's another specimen: "borrowers took out loans they couldn't afford."

That is bull. The only way for that to happen was through debasement of normal loan qualification. In all other similar criminal schemes, the law comes down hardest on the dealer. Users have a hard time turning down drugs when offered and money when given on the basis of a wink and a nod.

It is a huge fallacy to blame borrowers; or, if you do, they get 30 days in jail when the banksta dealer pimps should get life without parole.

Fri, 01/27/2012 - 00:11 | 2101668 Imminent Crucible
Imminent Crucible's picture

This "Capitalism Good/No, Bad!" is a useless circular argument because the term "capitalism" no longer has any meaning. Some people use it to mean "Big money runs the country",  others use it as a synonym for "free markets".

Our present crisis was caused by neither free markets nor entrepreneurship. It was the result of Big Govt in bed with Big Corporate Finance. Otherwise, every Wall Street bank would now be out of business, and Jamie Dimon would be begging for a job parking cars at the Ritz-Carlton.

The punishment for dumb borrowers who take on mortgages they can't afford is to lose the house. For the bank, it's to lose the difference between the unpaid principal and market value of the collateral. Too bad we don't follow that formula anymore. Maiden Lane, anyone?

Thu, 01/26/2012 - 18:33 | 2101062 vs an army all alone
vs an army all alone's picture

A little off topic but I thought ZH's might enjoy a little HOPE? - CHANGE?

Thu, 01/26/2012 - 18:33 | 2101064 Chuck Walla
Chuck Walla's picture

I don't think we would see this on CNBS, unless Santelli opened the throttle.

Thu, 01/26/2012 - 19:56 | 2101253 CrashisOptimistic
CrashisOptimistic's picture

Regardless of all else, that was a fucking excellent interview.  Tom Keane is a cornucopian glass half full guy, but he's also a skilled interviewer.  He can ask provocative questions because he understands the topic.

Thu, 01/26/2012 - 18:36 | 2101073 Chupacabra-322
Chupacabra-322's picture

Notice where the BlackHawk helicopters are landing.  On top of Banks.  Economic Martial Law coming soon to a city near you.  Chilling to say the least. 

VIDEO: Military Helicopters Conduct Covert Exercises Over U.S. Bank Building

Five black helicopters conduct special ops in LA

Video was captured last night of five military helicopters buzzing over downtown LA, conducting what the LAPD has described as a special ops urban warfare drill.

The footage, captured by CBS Los Angeles, shows a huge Black Hawk helicopter hovering over the US bank building along with four other OH-6 choppers, known as “Little Birds”.

Thu, 01/26/2012 - 18:47 | 2101082 Rodolfito
Rodolfito's picture

'Roach sees the painful process of deleveraging from excess debt, insufficient savings, and over-consumption as likely to take a long time'

Maybe not if what Jamie Dimon is terrified of, but plays out, happens .. a Greek default.

"The direct impact of a Greek default is almost zero," Dimon said. 

Thu, 01/26/2012 - 19:57 | 2101257 CrashisOptimistic
CrashisOptimistic's picture

Fuck this "deleveraging" talk.

We're adding 1.2 Trillion to the national debt this year, up from 15 to 16+Trillion.

That's Not Deleveraging!

Thu, 01/26/2012 - 23:43 | 2101633 deflator
deflator's picture

 His macro view is that since real wealth is being and has been transferred to the East and terminal decline exists in the West, deleveraging in developed countries must happen absent a resurgence in real wealth in developed countries. Real wealth being exports in manufacturing, commodities, etc.

 Money printing, QE, etc. is where the, "deleveraging is going to take a long time but will happen" comes in.

I've always been in agreement with his long calls but not his timing and it pisses me off that his timing has been good and mine very poor.

Thu, 01/26/2012 - 18:39 | 2101087 Poor Grogman
Poor Grogman's picture

Rule 1.    Money supply must grow.

Fact 1    Economies are hitting the wall of cheap rescource extraction.

Fact 2    Central banks create money (thats their job)

Result.    Stagflation as far as the eye can see.

Possible cure.  Let interest rates float, and let markets clear.

Comment "Won't happen in forseeable future"


Thu, 01/26/2012 - 19:06 | 2101135 Caviar Emptor
Caviar Emptor's picture

Biflation. Stagflation was what we had in the 1970s. GDP was booming versus now, so were real wages, unemployment and labor force participation were better, house prices were rising

Thu, 01/26/2012 - 18:40 | 2101088 chump666
chump666's picture

No fan here.

Thu, 01/26/2012 - 18:41 | 2101091 The trend is yo...
The trend is your friend's picture

Rosie and Roach are just laughed at by the banksters.  I wonder if they pay them in a brown paper bag just to say SEEEE their's another side to the story.  Just like our democracy with the Dem's and Republicans paid for by same group of thieves

Thu, 01/26/2012 - 18:49 | 2101098 non_anon
non_anon's picture

ha, not evey ones eyes, RP 2012!

Thu, 01/26/2012 - 18:54 | 2101105 JR
JR's picture

Again, it’s a financial entity, the former insolvent Morgan Stanley, that is guaranteed its survival based on its recent bailout suggesting a micromanagement of the Federal Reserve which has as its purpose the aggrandizement of its owners. It is disingenuous to offer criticism on how it will affect the economy when the bottom line is it will steal from the economy every day of the year in 2012. It’s hard to consider genuine the criticism of the Federal Reserve when the background of your criticism is that the Federal Reserve is legitimate.

BTW, what interest could Roach possibly have in the recovery, since Morgan Stanley now is doing just fine thank you without a recovery, and if things get worse they will just get more taxpayer dollars to pay their bonuses?

This is just pretend talk; the only man, Ron Paul, who speaks for those whose personal property is being stolen to bail out the bankers, is silenced by the Establishment.

The objective of Fed monetary policy appears to be one in which those who trade in money and collective power are given complete precedence over the interests of ordinary people and businessmen who work to produce the wealth of the country.

That Roach is a bit “worried” seems to be kind of a light response compared with the two aspects of the Fed’s response. Number one, it registers a failure of Fed policy so far in that the deepening crisis shows it is not working. Secondly, Fed policy represents theft of private property in order to keep alive the owners of the Federal Reserve.

So, Roach is a little troubled, a little uneasy, about all this? Hopefully he won’t awaken tonight, exclaiming as he rips the wool from over his eyes, Ah, those poor seniors, long-term unemployed and homeless families.

Thu, 01/26/2012 - 18:54 | 2101110 DaveyJones
DaveyJones's picture

he's betting the ranch cause all he does is shovel horseshit

Thu, 01/26/2012 - 19:01 | 2101121 Caviar Emptor
Caviar Emptor's picture

Ya know what's funny? At the start of the crisis Bernanke and other Fed heads and Monetarists smugly thought that Japanification of the US economy was the right ticket. Hell they were doing ok. And just as the 3rd Japan lost decade was getting underway we get news that Japan has lost the one thing that Was working for them: the export surplus! Looks like they picked the wrong month to stop sniffing glue. 

I always said Japan wold be the best case scenario for the US all through the early crisis. Because we run a trade deficit and they had a huge surplus. And because when Japan's 1980s bubble burst they had a healthy global economy everywhere else to pull them along. Not anymore. Quadrillion is the new billion deficit. 

Thu, 01/26/2012 - 19:03 | 2101127 lizzy36
lizzy36's picture

Very sensible interview.

What exactly would happen, if some sort of crisis (see fukishima for instance) happened to the US? What exactly does the Fed have in reserve?

Best thing for the US economy would have been if the Fed has announced they were starting down the normalization of monetary policy.

Where is a Fed Chairmen like Paul Volcker indeed.

Thu, 01/26/2012 - 19:10 | 2101145 DaveyJones
DaveyJones's picture

"federal reserve" now even their name is a lie 

Thu, 01/26/2012 - 19:04 | 2101132 Spigot
Spigot's picture

Roach, classic 1%er. Yammer yammer ... exports ... China ...

The dude is talking about exporting food to China. The only way we can balance trade on that is to destroy the value of the US$ so that the cost of those imports recycles the worthless $$$ back to the USA so that the worthless $$$ can extinguish US$ denominated debt.

China gets all our food exports. Ummm....

And the US gets to use the food as a chain around China's neck, until ...

China decides to do something about it, right?

Thu, 01/26/2012 - 23:25 | 2101601 LowProfile
LowProfile's picture

China decides to do something about it, right?

What, import water to grow food?  They have a problem there.

Thu, 01/26/2012 - 19:10 | 2101136 steve from virginia
steve from virginia's picture


Now you know what Roach Farts sound like: "Cumpetitiveness and productivity growth" magic buzz-noises from El Roacho as if these will do the job by themselves.

More like, speak the names of the dead and ...

Competitive at what, exactly? There is nothing done in Europe or other places that pays for itself, all depends on credit as endless subsidy. For more competitiveness and productivity growth (which actually means firing more workers and replacing them with machines) orders of magnitude more credit is necessary! Bernanke and Draghi don't go far enough.

Oops, my bad. The credit transmission systems are broken and new credit is counterproductive. There is that word again, the fate of industrialization is to meet its own (empty) promises.

Go fuck yourself Roach.

Another Wall Street cockroach is Vikram Pandit who has been given walking around privileges. Jonathan Weil shits all over his face and rubs Davos, Citigruppe and WEF in it:

Thu, 01/26/2012 - 20:00 | 2101264 Hedgetard55
Hedgetard55's picture


Roach is just one more bullshit artist in the hive of global banksterism.

Thu, 01/26/2012 - 19:13 | 2101144 RobotTrader
RobotTrader's picture

Tom Keene hands down has the best job.  Gets flown all over the place, Davos, Jackson Hole, etc.


Hob-Nobs with all the PigMen, Plutocrats, and the Bilderbergers.

Gets to enjoy the finest wine, 6-course meals, 5-star hotels, and unlimited use of Exotic Call Girls.

Sits around all day shooting the breeze, interviewing people.

By far the best news show around.

What a great profession.

By the way, what is a "Brookings Institute Fellow"?

Sounds like an open invitation to trade on insider information, get first allocations of IPO's, get invited to Davos every year, attend all the important Fed-sponsored conferences and boondoggles, etc.

What a country.  Gerald Celente must be steaming.

Thu, 01/26/2012 - 19:16 | 2101158 akak
akak's picture

The captain of the Titanic had a plush job with many perks too --- for a while.

At the end of the day (had he been less honorable, say like any CEO today), he would have traded it all for a seat in a lifeboat.

Mene, mene, tekel, upharsin, Robot.

Thu, 01/26/2012 - 20:27 | 2101329 Jay Gould Esq.
Jay Gould Esq.'s picture

Robo -- nice work.


Fri, 01/27/2012 - 03:38 | 2101869 HardlyZero
HardlyZero's picture

Did Corzine get a Davos invite ?  Seems like it would be a good place for The Honorable MF to "make a stand" ... perhaps just under a cornice somewhere.  Something simple like that could start that next big avalanche in the markets...  They should fly in Santelli...and Celente...between them on the same slope they might start a chain reaction and the economy would start melting from the top of Davos...all the way down to Wall Street.

Thu, 01/26/2012 - 19:16 | 2101161 RobotTrader
RobotTrader's picture

Question: Does the esteemed Doug Noland get invited to Davos?



Poor guy is now sitting in rush hour traffic in Pennsylvania, battling snowstorms, migraine headaches, etc.

Heh, back in 1999, he and David Tice had dreams of becoming fantastically rich being short-sellers.

Thu, 01/26/2012 - 19:28 | 2101180 akak
akak's picture

Who gives a flying fuck what all the oligarchs and sociopaths do in the first place, at Davos or anywhere else?

Oh yeah, for a craven, servile, spineless bootlicker and unprincipled sycophant like you, obsessing over such people, and their power, apparently seems to (temporarily) fill the gaping chasm in your soul.

Thu, 01/26/2012 - 21:54 | 2101476 fightthepower
fightthepower's picture

Go suck their asses looser.

Thu, 01/26/2012 - 22:06 | 2101498 francis_sawyer
francis_sawyer's picture

back in 1999, he and David Tice had dreams of becoming fantastically rich being short-sellers.


Well since you're such an avid bull trader... Why the hell aren't YOU in Davos right now enjoying lines of coke & midget tranny porn?...

On 2nd thought, the latter part of that I have no doubt you're enjoying as we speak...

Thu, 01/26/2012 - 19:27 | 2101188 Reese Bobby
Reese Bobby's picture

9 minutes and 43 seconds wasted on the video, 2 minutes reading these comments, and 30 seconds writing this.  I have to take up wood carving or something.

Fri, 01/27/2012 - 05:39 | 2101917 StychoKiller
Thu, 01/26/2012 - 19:41 | 2101223 blindman
blindman's picture
Thursday, January 26, 2012
The Elite want to Destroy America
( short video on mind manipulation through media )
" use america to destroy america." there the big plan.
Gary Null - The Natural Living Show
Thursday January 26 12:00pm
relates to this. last part of hour interview
with cullen murphy ( minute 42.00 )
concerning "the inquisition". (god's jury) i did not know
that it was actually called off, officially, in 1908.
then the fed took over, having left the world adrift
for 5 years. digital inquisition cometh?
also here paul creig roberts, dr.,"drowning in hypocrisy.." commentary. (minute 24.40)
and 250,000 farmers drank pesticides, suicide, to get
out of debt to monsanto? could that be?
but, this is crazy?
USS Enterprise False Flag!!
re: the fed. stealing in broad daylight. it is the
business they have chosen, like in the godfather,
organized crime all the time. you just get used by it
and to it till it kills you.
cheers !

Thu, 01/26/2012 - 19:50 | 2101239 AldoHux_IV
AldoHux_IV's picture

Poetic Irony or Coincidence?

faustian, are often used to describe an arrangement in which an ambitious person surrenders moralintegrity in order to achieve power and success: the proverbial "deal with the devil".[1]

Thu, 01/26/2012 - 19:55 | 2101248 Bartanist
Bartanist's picture

History not only rhymes, the bankers are a spectacularly unimaginative lot.

Take away people's homes to make them pliable, INDEED!

... and distract them with issues unimportant to the bankers.

Thu, 01/26/2012 - 20:03 | 2101273 Ungaro
Ungaro's picture

Competitive devaluation (currency debasement) is going to lead to a happy ending how???

Thu, 01/26/2012 - 20:09 | 2101289 the 300000000th...
the 300000000th percent's picture

Armageddon is already priced in. Risk on!

Thu, 01/26/2012 - 20:09 | 2101290 The Alarmist
The Alarmist's picture

"letting capitalism go unchecked"

Really? I can't recall the last time in my life when capitalism (which I vaguely recall from B-School as involving voluntary exchange of goods and services for money or other goods and services)  was even practised, much less allowed to go unchecked.  

Maybe you mean "Crony capitalism," or even pillaging by the criminal elite.

Thu, 01/26/2012 - 20:12 | 2101295 The Alarmist
The Alarmist's picture

BTW, the Fed is trying to pull the wool over our eyes? Duh! 

The fact that people might pay for that analysis suggests even more wool is being pulled over someone's eyes.

Thu, 01/26/2012 - 20:17 | 2101308 jjsilver
jjsilver's picture

zerohedge, get with it the fed is a criminal cartel. what are you afraid of?

Thu, 01/26/2012 - 20:41 | 2101356 spinone
spinone's picture

The take away from that interview is 'how can austerity improve competitiveness?'  It can't unless people are willing to accept a lower standard of living.

Thu, 01/26/2012 - 20:43 | 2101363 Let The Wurlitz...
Let The Wurlitzer Play's picture

I love the question - "is capitolism broken ????".  WTF !!! We havent had capitolism for years.  I would go down the list of government interference and B.S. but I do not think this audience needs me to.

And The Wurlitzer plays on ....


Thu, 01/26/2012 - 20:54 | 2101385 vincent
vincent's picture

So Kyle Bass persuades U of Texas endowment to get into gold.

Back then I was expecting others to follow. Did'nt seem to happen.

I wonder if he's finally got some others convinced.

"mainstream entities will enter the gold market".

Talk of companies like GE, and others with close ties to the GUB increasing holdings (if they have'nt already).

Seems like this train has picked up a lot of speed in just the last few weeks.

More buffalo roaming around my Ponderosa this week.

Thu, 01/26/2012 - 22:10 | 2101503 Blues Traveler
Blues Traveler's picture

It was not Bass, it was Corriente, a fund in Ft Worth, they are as smart as Bass but they are much better traders. 

Thu, 01/26/2012 - 21:14 | 2101409 Zero Govt
Zero Govt's picture

Stephen Roach of Morgan Stanley couldn't solve a problem if his life depended on it

This academic (arrogant meddling moron) promotes the insidious establishment idea we need more regulation to bring the banks to heel dissing Greenspans era as too much "self regulation"

Roach has patently been completely asleep (or pissed out of his tiny little blinkered mind) for 4 years and has not seen the brilliant and effective 'Icelandic Solution' to their much bigger (by GDP) banking crisis ...namely let the bankrupt tossers (bankers) go bankrupt

It's called the FREE MARKET Mr Roach but you've not heard about it working/windbagging for a bloated diseased banking dinosaur called Morgan Stanley 

Fri, 01/27/2012 - 09:33 | 2102125 Archduke
Archduke's picture

are you kidding?  MS was kicking butt back in the days of the Three Steves, in no small part due to Roach's strategies.


Thu, 01/26/2012 - 21:19 | 2101418 MoneyMagician
MoneyMagician's picture

Unemployment is not a singular measure of how healthy a economy is. Remember the housing bubble? Yeah we had 5% unemployment, and look how that changed. Unemployment, even skewed numbers don't indicate the state of the economy on a sustainable path.

Thu, 01/26/2012 - 21:19 | 2101420 Eric L. Prentis
Eric L. Prentis's picture

Chairman Bernanke admits his Zero Interest Rate Policy (ZIRP), that now extents to the end of 2014, is a massive transfer of wealth from savers to borrowers, which reduces capital formation. Consequently, savers and over-indebted borrowers are not spending, reducing demand. Quantitative Easing (QE) by the Federal Reserve to monetize the federal debt, which keeps interest rates low, only increases inflation and asset prices on items everyday workers desperately need, i.e., gasoline, food, clothing. This transfers money from the real economy to the financial markets, further hurting demand. (Another result, increasing asset prices in the stock market mainly goes to the top 10%).


Since 2000, the national debt has increased from about $5.6 trillion dollars to $15.3 trillion dollars, or 273%, in twelve years. Adding in the increased debt at the Fed for QE 1&2, +$2.1 trillion dollars, and Fannie Mae and Freddie Mac debt, +$5.3 trillion dollars, brings the US national debt to $22.7 trillion dollars, or 149% of GDP. Fiscal policy is under severe strain and politically, expanding it is unworkable.


Public and private debt is about 370% of GDP. As the public deleverages, mainly through bankruptcy and defaulting on their underwater mortgages, government has attempted to spend more to maintain demand. The problem is we have hit a debt wall, it is impossible to service debt when it is 370% of GDP.


All the stupid decisions by the financial elite have already been made (Mortgage fraud, securitization, MERS, robo-signing). The American people no longer want to use taxpayer money to support the status quo. The only solution is debt forgiveness. Let the zombie banks die. Raise interest rates to increase demand. Let’s transition out of this casino financial system and start growing the real economy again.

Fri, 01/27/2012 - 03:58 | 2101881 DonutBoy
DonutBoy's picture

That's all true.  Marking to market and letting the bankrupt die is the only answer.

The current leadership cannot do it.  They are beholden to the zombie institutions.  Their economic advisors and their campaign money all come from there.

It seems to me freakishly unlikely that the next president will be able to do it either, whoever wins.

It is entirely possible the government undergoes radical transformation.  The math on the debt is not arguable.  The likelihood of an elected leader in the current form of government slashing spending by 40% is very, very close to zero.  The only policy course left is the gradual destruction of the dollar, hoping no one will notice and bringing the real debt level down to something we can pay.

It is interesting how they're pining for Volcker - but Volcker could not do it today.  We are already above 10% unemployment, and we have a current account deficit.  Most of all though, the administration does not want what Reagan and Volcker wanted.  They do not want to end inflation and have a strong currency.  That would mean paying off the debt in real money, in current dollars.  It cannot be done.

There is no answer within the constraints of the current system.  The path they will follow is to continue to be force the dollar down and try to muddle through.  They can do nothing else. 

Conceptualizing life without the dollar is hard - but historically this is a regular event.  Fiat currencies die.


Thu, 01/26/2012 - 21:27 | 2101433 eddiebe
eddiebe's picture

I've heard it all before. This time is really it. Back up the truck before it gets away. Right. The beast will not roll over.No way no how. It's not over til they say it's over. By all means, buy the dips, but then sell the peaks. This is no more the moon shot than all the last ones were.

Thu, 01/26/2012 - 21:32 | 2101443 JW n FL
JW n FL's picture



Obama goes 'protectionist' (in the SOTU) on our 3rd largest export partner - yes, China.

Seriously? and these idiots will buy into that shit.

China started the automotive trade case two days after President Obama imposed steep tariffs on surging imports of Chinese tires in September 2009. After an inquiry, the W.T.O. ruled this autumn that the American tariffs on tire imports had complied with international trade rules.

The new tariffs China imposed Wednesday will be antidumping duties of 8.9 percent for G.M. vehicles, 8.8 percent for Chrysler, 2.7 percent for Daimler and 2 percent for BMW.

The ministry separately imposed additional antisubsidy duties of 12.9 percent for G.M. and 6.2 percent for Chrysler.

The ministry’s statement said that all of the new duties would be calculated on vehicle prices that include China’s existing 25 percent import tariff for all family vehicles.

Bro, stirring the Pot is my thing.

Thu, 01/26/2012 - 23:16 | 2101586 agrotera
agrotera's picture

Love love love Steven Roach always!!!!!

Thu, 01/26/2012 - 23:18 | 2101592 deflator
deflator's picture

Stephen Roach has been saying since 2005 that consumption in the U.S. would decrease and in China it would increase. Makes sense in a finite world--the pie only being so big and all.

Thu, 01/26/2012 - 23:27 | 2101606 q99x2
q99x2's picture

Are those dudes really being serious? Here we have minimum wage sign spinners advertising flu vaccines on the street corners, Military helicopters practicing in downtown LA and ZH readers commenting similarly from around the world. These guys talking like they are are not likely to survive what is coming. But Stephen Roach seems to know his economics. Why can't he just come out and explain how to purchase a reservation in the underground bunker system?

Fri, 01/27/2012 - 00:34 | 2101693 GernB
GernB's picture

He doesn't want compeition for bunker space.

Fri, 01/27/2012 - 00:22 | 2101680 Central Bankster
Central Bankster's picture

It is amazing to hear this kind of honesty from an insider at a major financial wirehouse.  But, no doubt he is the lone dissenter among the perma bulls.  The problem with being negative or bearish on anything, is the difficulty in making money knowing something won't work.  Insanity in financial markets seems to be measured decades, not days or weeks.

Fri, 01/27/2012 - 00:32 | 2101690 Central Bankster
Central Bankster's picture

Also, his comment about unchecked free markets needing regulation.  Its garbage, let them make their bad bets, and then let them fail and let their depositors get crushed.  Simple stuff.  Individual investors and speculators do not get bailed out of their positions and neither should financial firms.  Finally, any individual or hedge fund should be able to deposit their funds somewhere, and earn zero % and take zero risk. Period.  None of this rehypothecation or making brokerage deposits part of the firms capital for investing in government or corporate bonds etc.

Fri, 01/27/2012 - 00:43 | 2101707 GernB
GernB's picture

I agree it is garbage. We have spent decades carefully tearing down all the protections that prevent the actions of one person or institution from hurting people who have no connection to them. Then when it all falls appart you just point and say: see capitalism doesn't work. Yea, it doesnt work bcause government intervention has ensured that it won't. Reestablish the protections that ensure that the only person hurt by their bad judgement are those who took action on that bad judgement and freedom will work.

Fri, 01/27/2012 - 03:51 | 2101873 HardlyZero
HardlyZero's picture

I don't think its garbage at all.  See MF Global's Chapter 11 vs. Chaper 7.  The system allowed MF to be dual chartered...and the evil judge decided to allow the segregated accounts to be used to pay the bankruptcy lawyers...and go Chapter 11.  If the system were working Chapter 7 would have been used and all the segregated accounts paid off first...before getting into the hands of the courts.  The deregulation includes the removal of the banking laws that protected depositors for 100 years.  The system was deregulated in the 1990's to allow for "high finance" and risky business.  Now we are all (every major central bank) in the crapper with the banks that helped finance Wall Street and the major world Governments.

Fri, 01/27/2012 - 10:05 | 2102237 JeffB
JeffB's picture

It's not that they're "not regulated", it's that the regulators and the whole bureaucracy is incompetent. Political influences and shifting policy goals are imposed upon the financial institutions, while the Fed is playing around with blowing bubbles via interest rates and money supply.

We don't need "more government" or "more government intervention", we need less of it. The government needs to set fair, balanced, solid rules that won't be constantly changing, and then let the free market handle things.

The government is the problem, not the solution at this point.

Fri, 01/27/2012 - 21:41 | 2104636 MoneyMagician
MoneyMagician's picture

They are regulated, the Federal Reserve regulates them. Glass-Steagall wouldn't have prevented the housing bubble. The housing bubble was a concentration of expansionary credit and home buyers thought a consumer item like house was a investment. Consumption isn't growth. Investment creates growth. Nothing in the productive economy justified the housing bubble, wages didn't go up, there wasn't a sudden explosion of american population looking for must-need homes, or employment, nothing. Just a credit bubble. Federal Reserve controls the banking cartel in different ways from reserve ratios, capital requirements, to interest rates. The Federal Reserve has the thinking that inflation is growth, which isn't, and that spending money is growth, which again it isn't. That's why when housing market was more than doubling per annum, everybody including The Bernank said it was the result of economic growth. Expanding debt to macrolly create the illusion of growth isn't growth, though many americans, including politicians, even economist, can't tell the difference. Housing bubble is usually, overwhelmingly is the result of expansionary credit, you had a housing bubble in many countries, the correlation is very damning considering that expansionary credit is usually what happens in conjunction with housing bubbles. Japan had it, China had it, many countries had it.

Sat, 01/28/2012 - 00:26 | 2104916 JeffB
JeffB's picture

Exactly. They're regulated as was discussed in Wednesday's article on How MF Global Customers Got Thrown Under the Bus

It was just that the different branches of regulators were fighting over territory and which sets of regulations should take precedence.

Adding more regulations and more regulators isn't necessarily going to eliminate the "titan law firms"from battling over the spoils, nor prevent the disaster in the first place.

It was the government and it's spawn, the Federal Reserve that created the toxic environment which engendered this mess in the first place.


Fri, 01/27/2012 - 01:51 | 2101793 lolmaster
lolmaster's picture

this guys game is try to suck CCP ***k harder than goldman. 

Fri, 01/27/2012 - 09:59 | 2102205 JeffB
JeffB's picture

I disagree with this statement:

"Taking on the mistakes of Greenspan, letting capitalism go unchecked,"

I agree with Tom Woods, Jr. when  he makes the case that it isn't "capitalism" or "deregulation" that is at fault here in his book Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. It's the government intervention that's causing the moral hazard and the distorting of the free market signals investors and borrowers rely on in their financial decisions.

They give government FDIC insurance to induce people to forgo due diligence on where they put their money. It also induces the banks to take greater risks. Then the government's been artificially depressing interest rates far below market rate for extended periods of time. They were also pressuring the banks to make loans they didn't want to make, handing out multi-million $ penalties for not making enough of them and not making them to the preferred classes they wanted them made to. The "Too Big To Fail" mentality also induces greater risk taking. Then the regulations they put in to fix the problems add barriers to new entrants into the field giving a major advantage to the already established, often incompetent, banks the government is artificially keeping in business.

This is almost the antithesis of free market capitalism and yet people who should know better persist in trying to blame the problems this causes on "capitalism".


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