Mish: Instead of having dinner with those that caused the problem and have no idea how to fix it, the powers that be should have instead sat down with the top 20 economic bloggers as to what to do. We have been warning about these problems for years.
Volcker, for his part, says the current crisis has its roots in the lack of restraint inherent in the highly leveraged system that evolved, one in which winners were rewarded exorbitantly but the inverse didn't seem to hold.
"The first panacea for a mismanaged nation is inflation of the currency; the second is war."
-- Ernest Hemingway, Esquire magazine, September 1935
"Price stability is something which is essential for the poorest and the most vulnerable of our citizens. They cannot protect themselves against inflation. It is extremely important that we understand that moderation today is necessary if we want to deliver price stability in the medium term."
- European Central Bank president Jean-Claude Trichet, April 2008
It's all about phsychology
phantasm08037,
I think it is all about phychology. This money are not real. And yet, whole world is working to earn what we print at will. Talking about Matrix...
I think that given that this system has a value only in the emotions of it's participants, the FED must be really obsessed with maintaining the belief in the system. It really doesn't matter what the value of a dollar is, as long as people perceive it to be satisfactory, whatever that satisfactory perception happens to mean at the time.
But I believe that the FED, cannot pay enough attention to beliefs right now, because it is saddled with too many friends, liabilities and entangling alliances. This, of course, is ironic, that just when it is the most suitable time to keep the straight face, the FED has no other options but to openly work against those beliefs, by printing more money, issuing more credit, taking over the markets, transferring treasuries into the hands of bankers, and doctoring the economic statistics.
It is ironic, that the only time it really has no choice but to worsen it's situation, is only when it should be working on nothing else, but bettering it.
But the FED, like any scam, really has to go wrong and destroy itself. Otherwise, we would have to agree that monetarists had really invented a way of being the richest without any work done. It's a scam, and a scam has to fail at some point. That point is either this one or the next one.
I think the fact that it had failed, will be considered our good fortune, way in the future. It will be regarded as an event that delivered us from a shameless Matrix of fiat into a real world, where we earn exactly what we worth.
If I am wrong on these morality musings, then why don't we just get high and stay high? Why do we need to be bothered with real world at all?
More resilient fiat system, fiat forever - downright scary!
FakeBen,
But if a system could be made more resilient, couldn't it have a chance to survive? And if this system survives for much longer, wouldn't it then mean that the laws of universe were suspended?
It would mean that miricals are possible and quite doable, and that there is no need to work or create anything, just do miricals, just print paper.
It would mean that all other races are inferior to us, that they just going to stupidly work to earn our paper forever. That would mean that they aren't smart enough to say, - "Hey! Why should you guys print? We want to print so you can work earning what we print!"
Faced with such a horrible and scary paradigm shift, I'd rather prefer to see FED as usual, and to see the fraudulent system failing. Such a failure would prove again that you can't just borrow yourself into riches, and that I am not just crazy or going crazy.
That would prove that I should have no other human regulating me, and value of my money, unless it is not a human, but God himself. It would show once again, that trusting people is a horrible sin, and that most are sinners in that way. It would also punish those who trusted paper and crooks at the FED, by destroying their whole lifestyle, their "assets", everything they worked for, their whole sub servant style of living. No human should take an order from another human, for if it does, it should lose everything. This is very American, and very important truth, which needs to be shown to be true.
Should the FED and it's fiat survive and never fail, what would be the point of living?
So, could it be that it's by the guidance of a benevolent providence, that the FED is destroying itself, as if it was asleep at the wheel. If bad really means bad, then shouldn't we expect exactly what we observe today?
Gets it wrong
The FED doesn;t seem to think that economic activity occurs in the real world. If you listen to them, it's all about psychology. I would not dispute that mass psychology can play a role in some instances but mostly in the latter stages of booms and busts when the general public realizes that the authorities have been lying to them. Its all about expectations to the FED, not too much phoney credit. If the bust occurs you can be sure it will be blamed on the private parties that took the free credit and supplied funds in support of policies like the Community Reinvestent Act. The idea was that poor people could get rich quick by acquiring leveraged assets that only go up. After all, middle class people had been cashing out with no taxes on houses purchased with leveraged money 20 - 30 years earlier. Who knew this couldn't go on indefinitely? Only people with common sense I guess.