I keep meaning to write a post about the absurdity of what the Federal Reserve is doing right now, while relating it to some the wikinomics themes. Maybe something about how the Federal Reserve, with it’s top-down, centrally controlled structure, seems to keep thinking it can outsmart the mass collaboration of the open market… and how time will almost certainly prove them disastorously wrong… again… as time over, and over, and over has proven central banks disastorously wrong when they actively intervene to distort markets in ridiculous ways. Anyone remember all that talk about Japan’s problem being that they refused to let any bad financial institutions fail? Sound familiar?
Or maybe something about the importance of openness and transparency, as the scope of the lies and deceit grows more obvious daily. Many have long argued that the U.S. had the deepest, most transparent, best regulated capital market in the world, and that is a key foundation of the nation’s riches. Not a reputation to be given up lightly.
Or possibily something about how, for all the concerns people have had about the editorial process, wikipedia seems to be better at catching problems quickly than the Fed is (they were called liar loans people - someone should have looked into it). Is is time for the wikicentralbank? Or something about how if you don’t want to cause a panic, stop making all these panicy response moves - they’re nerve racking. Then, for fun, link to some of the articles about Bear Stearns reporting record profits for so many years in a row and call it a day.
But I haven’t been able to put it together just yet, so instead - during this historic time where the Feds have intervened to basically bailout an investment bank for the first time since the Great Depression, while reving up to take on all the sub-prime junk they can at face value - I’ll just link to this fantastic interview with Jim Rogers on CNBC. It’s 11 minutes long, and worth every second. On a side note, the link is via Patrick.net, a site where they were writing about the rather obvious housing disaster coming long before the Feds ever woke up. Seemed appropriate. The NY Times also has a good article on this mess.
I’ve transcribed a few of my favorite quotes (as closely as I could on limited time) below.
“If you bail out every investment bank that gets in trouble, that’s not capitalism - that’s socialism for the rich.”
Interviewer: What are the first two things you would do if you were Bernanke?
I would abolish the Federal Reserve and I would resign. (How would this help Americans?) Then we don’t have anyone printing money, no inflation in the land, no collapsing currency… no country in the world has ever succeeded by debasing their currency. That is what this man (Bernanke) is trying to do.”
Interviewer: Seriously, absent abolishing the Fed, what would you do to get out of this credit crunch and put in liquidity?
“Maria, what is so wrong with a recession? It can cost you more trying to prevent a recession then to have one. We’ve been having recessions for hundreds of years… they’re like forest fires. Nature invented them to clean out the underbrush so the forest could revive and grow on a stronger foundation. Spending all this money trying to prevent a recession is making it worse.”
“The Central Bank is now going into the landlord business. What is Bernanke going to do, get in his helicopter and fly around the world collecting rent? This is absurd!”
“Remember that this is what the Fed Reserve did in the 1970s. They just printed money. We had huge recession, huge inflation, then we had to bring in Paul Vocker to solve the problem. He had to take interest rates to over 20% to solve the problem. That’s what going to happen again.
“See what he did. You can bring me your bad loans, I’ll give you government loans instead. What’s he going to do next, collect car loans?”
“At least the Chinese government is honest. They’re saying there is inflation in the land. The American government is says there’s no inflation. Where do these guys shop? Everything is going through the roof and they say there’s no inflation… China’s not sitting there lying about it… Bernanke’s throwing gasoline onto the raging fire.
“More regulation (on the investment banks)? You want Alan Greenspan and Bernanke? These are the guys that got us into this situation… I don’t want more regulation. Let the market regulate. If XYZ needs to go bankrupt, let them go bankrupt.”
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Up until the credit crunch banks were competing fiercly with each other to lend out money, shouldnt they now be competing with each other to get it back instead of expecting to be bailed out by daddy Fed. One way they could do this is to start offering to write debt off in return for cash now. Thats what they would do if there was no FED.
Comment by Sir Broke - June 27, 2008 6:17 pm