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According to this CNN/Money report, it would appear that Wall Street has a new favorite candidate in 2012 after candidate Barack Obama, back in 2008, raised more money from the financial services industry than any other candidate in history.
New boss, same as the old boss … and the ones before that.
Maybe we’ll get a good third party candidate this year…
After reading through some of the recently released transcripts from the 2006 Federal Reserve policy meetings, it occurred to me for about the thousandth time that economists are particularly ill-suited to oversee an economy where the financial system is, from time to time, run by psychopaths each trying to one-up the other.
During normal times, economists’ models of how the world works seem to function reasonably well, but when a multi-decade orgy of money and credit creation came to a head a few years back, they were completely unaware of how badly some people were acting and how contagious this was.
The central bank meets this week and is expected to revamp how they communicate their thinking about monetary policy to the world, but, maybe they should spend more time figuring out how to better observe what’s going on in the world – looking beyond the charts, tables, and models that they had their noses buried in back in 2006, oblivious to the looming crisis in housing and credit markets.
It was all there to see for anyone willing to make a modest effort to get out into the real world and look around.
Wild-eyed buyers lined up for blocks to buy new condos and mortgage brokers with barely a high school education were raking in hundreds of thousands of dollars a year in commissions by peddling all kinds of “exotic” mortgages to borrowers who, in many cases, didn’t really understand what they were signing.
As we’ve come to find out, there was a good deal of fraud involved here by both lenders and borrowers as few seemed to care about how their individual actions might affect others in the fullness of time.
You might say that a good asset bubble brings out the psychopath in many of us.
Sorry, but after downloading the transcript(.pdf) for the January 31st, 2006 FOMC meeting with the intention of looking at all the praise heaped on Alan Greenspan on his last day as Fed Chairman in order to relay selected misguided quotes in this post, the 78 page length of the document proved too daunting, especially after all the joking around in the beginning of the document at a time that the central bank could actually have done something to prevent or mitigate the financial market disaster that followed a few years later.
Instead, relying on the many poor souls in the financial media who had to slog through transcripts for all eight meeting that year, we find that Treasury Secretary Tim Geithner (New York Fed President at the time) appears to have been the most misguided as to the legacy of the outgoing Fed chief when he noted:
I’d like the record to show that I think you’re pretty terrific, too. [Laughter] And thinking in terms of probabilities, I think the risk that we decide in the future that you’re even better than we think is higher than the alternative. [Laughter]
Surely you can understand better now…
More confirmation of the Peter Principle and that economists are particularly ill-suited to run an economy were provided in this assessment of the Greenspan tenure at the Fed by San Francisco Fed President Janet Yellen who, since, has been promoted to Fed Vice Chair:
Needless to say, it’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. And if I might torture a simile, I would say, Mr. Chairman, that the situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot. [Laughter]
Again with the laughter.
I’ve been meaning to dig through the European Central Bank’s balance sheet data in order to better understand how it has grown so fast in recent months (as indicated in red below) and why the Germans aren’t up in arms about it.
Someday I surely will, though there doesn’t seem to be any real urgency since the recent spurt of money printing is not likely to end anytime soon. Between now and then, this graphic from The Economist’s Central banks: Crazy aunt on the loose will have to do.
It is fairly remarkable to stop and think how far we’ve come since the world’s central bankers saved us (and, of course, the biggest and most dangerous banks) from sure annihilation three years ago. Who would have ever imagined back in 2005 or 2006 that nearly the entire globe would have “turned Japanese” by now.
Who imagines today that the chart above left might not change for another 10 or 20 years?
I don’t know about you, but when I watch this video with the heads of French President Nicolas Sarkozy and German Chancellor Angela Merkel superimposed on characters from a 1963 sketch that, for some reason, is wildly popular when broadcast on German TV on New Years Eve, I can’t help but think of those Saturday Night Live caricatures of German TV personalities somehow working behind the scenes.
This story at Spiegel Online has all the particulars about the video that has gone a bit viral, also known as “The 90th Rescue Summit” or “Euros for No One”.
It still pales in comparison to what was done a few years ago, but, at its current pace, the Federal Reserve’s generous central bank liquidity swaps now aiding European banks will soon rival that of the 2008-2009 financial crisis as shown below, another $37 billion being added last week to bring the total up to just shy of $100 billion.
For those of you new to this story, see this WSJ commentary by Gerald P. O’Driscoll the other day and his appearance on CNBC on the same subject.
By Tim Iacono, Since 2005
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