Monday 24 January 2022

"That the central banks were totally surprised by today’s inflation indicates a fundamental failure. Surely, some institutional soul searching is called for...."


"The obvious question to ask first is how the Fed [and the local Reserve Bank] blew its main mandate, which is to ensure price stability. That the Fed [and the Reserve Bank] was totally surprised by today’s inflation indicates a fundamental failure. Surely, some institutional soul searching is called for....
    "America [and the world] is awash in debt. Everyone assumes that taxpayers will take on losses in the next downturn. Student loans, government pensions, and mortgages have piled up, all waiting their turn for Uncle Sam’s bailout. But each crisis requires larger and larger transfusions. Bond investors eventually will refuse to hand over more wealth for bailouts, and people will not want to hold trillions in newly printed cash. When the bailout that everyone expects fails to materialise, we will wake up in a town on fire – and the firehouse has burned down.
    "In 2008, regulators and legislators at least had the sense to recognize moral hazard, and to worry that investors gain in good times while taxpayers cover losses in bad times. But the 2020 blowout has been greeted only with self-congratulation.
    "The same Fed [and Reserve Bank] that missed the subprime-mortgage risks in 2008, the pandemic in 2020, and that now wishes to stress-test 'climate risks,' will surely miss the next war, pandemic, sovereign default, or other major disruptive event. Fed regulators aren’t even asking the latter questions. And while they issue word salads about 'interconnections,' 'strategic interactions,' 'network effects,' and 'credit cycles,' they still have not defined what 'systemic' risk even is, other than a catch-all term to grant regulators all-encompassing power.
    "Regulators will never be able to foresee risks, artfully calibrate financial institutions’ assets, or ensure that immense debts can always be paid. We need to reverse the basic premise of a financial system in which the government always guarantees mountains of debt in bad times, and we need to do it before the firehouse is put to the test."

          ~ John Cochrane, from his post 'Accounting for the Blowout'

3 comments:

Anonymous said...

REAL libertarians come to SOLO with Lindsay Perigo and learn about how peter faggwell the actual known communist infiltrated the libertarian movement in NZ. Peter Cresswell AKA "extremely PC" refuses to live debate Lindsay Perigo , because hes frightened and scared shitess of being absolutely exposed
http://www.solopassion.com

Tom Hunter said...

Peter.

Despite our disagreements on the vaccine matter, and your obviously outraged feelings on the matter, I do have to wonder why on earth you're allowing this abusive crap to get through? Showing others what you're dealing with? A split in the already tiny NZ Objectivist community? That aside...

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I've reached the point where I think this has to end in a crash of some sort. I just don't think it can be fixed in increments, and with the rise of inflation and the inevitable prospect of Fed interest rate rises such as we saw forty years ago, but now dumped on top of thirty trillion Federal debt (as opposed to what... $1 trillion in 1979/1980?), I can't see how it can be avoided. Truly we face Scylla and Charybdis.

Peter Cresswell said...

The long-term is arriving -- financial chickens will come home to roost: as you say, either via debt plus necessarily rising interest, or (possibly worse) some attempt to avoid the crash.

(Yes, you're right about the crap -- just looks like my other moderator is on holiday, so I've removed the worst of it. In any case, the fellow doesn't seem to subscribe to any version of Objectivism I've ever seen. (Or even reason.) And Mr Perigo has long ago forsworn both sense-of-life and Objectivism, despite his website's name, so --no-- nothing new there as far as I know.)