Posted by: graemebird | December 9, 2011

The Deeply Ignorant Cambria

Joseph Cambria in his own words:

“Those with cool heads that understand how the current system works will, I believe, come to the realization that Ben Bernanke and Sec Treasury Paulson have done an outstanding job in fulfilling their responsibilities by acting intelligently and with foresight so as to avoid the possibility of a full on depression both in the US and the rest of the world.”

Great work. Leave the economics prediction to those who understand economics.  The US has been in a depression ever since Ben and Henry went on their stealing spree. Unemployment is around 20%. Inflation around 11%. Real GDP has been falling all that time.  Nor is there any sign of recovery. Nor CAN THERE be any recovery without reform. Here is the fools entire screed:

“[Joe Cambria – our in-house trader – takes a hard look at the arguments swirling around government intervention and buyouts in the recent finance fooferaw. It’s not as simple as it looks...]

No one needs another blog post telling him or her what’s been going on in the financial markets. I also don’t need to tell anyone about the caning the Fed and the US Treasury have been getting for the “bailouts” (AIG was a nationalization etc) and how the US is practicing ‘socialism’.

Free market types have been caning the US government for its intervention while the left is suggesting the interventions are being carried out to socialize losses and privatize profits. This is despite the fact that shareholders in these failed firms have lost almost all their investment (ignorance is bliss I guess).

Free market types and intelligent lefties need to understand that the Federal Reserve System was actually created to ensure security for the US financial system and to be a lender of last resort. It is the job – in fact it is a prime function of the Federal Reserve – to prevent during times of financial stress the deflationary impulse that could lead to a very serious recession or depression as a result of debt deflation. The Fed is carrying out its duties in the way meant to assist in liquefying the system, ensuring that institutions which are unable to borrow money can borrow through short term Fed loans during the crisis. In other words the Fed and other major central banks are trying to provide ample liquidity to the system during such times of stress.

Those with cool heads that understand how the current system works will, I believe, come to the realization that Ben Bernanke and Sec Treasury Paulson have done an outstanding job in fulfilling their responsibilities by acting intelligently and with foresight so as to avoid the possibility of a full on depression both in the US and the rest of the world. I think given time the history books will judge these two men very highly.

People have suggested that the US authorities are in the process of creating new levels of moral hazard, which in my mind is frankly hard to see and doesn’t hold up to close examination. The Equity owners in all these firms have lost their capital. Sure the bondholders come out a little better but imagine having to sit around wondering if your loan money will be returned while the Fed’s managers liquidate AIG; people forget the Fed now ranks ahead as creditor. The management of all these firms have lost their jobs and most of their net worth. I can’t see an argument for moral hazard through the way the Fed and Treasury have conducted their activities. In fact I see the US taxpayer walking away with a big profit as a result of the Fed’s AIG loan terms and conditions.

However, I am quite conflicted with the Resolution Trust type bailout that was announced on Friday and which we should hear more about early this week. I believe the basics of the deal is that the Treasury will create a structure whereby banks and some other financial institutions will sell the toxic waste held on their books through a reverse auction process. The main objective is to clear the banking system of nearly all the radioactive crap so as to help the banks start lending again. I can understand the misgivings free market types have about this arrangement and I can also see how lefties would argue this is a bailout of the rich and wealthy Wall Street types.

Even so, the cost of this proposed rescue package would be quite small if the US and the world went into depression. And that’s the trade off: act now and contain the costs or act when the US and possibly the rest of the world is in depression.

People are now suggesting we need to look at ways of adding more regulation – even more than before.  The inference is that somehow more bureaucracy than we have at present will somehow rescue us from future financial crises. It won’t and the suggestion is pure nonsense. Financial crises will be with us forever. In any event Wall Street is about to be history, as Morgan Stanley and Goldman Sachs will not exist in their present form; they will merge or die. It’s clear that the Fed and the US Treasury prefer to see universal banks rather than investment banks in the post crisis world. Ironically investment banks came about as the result of depression era regulation that demanded a separation of traditional commercial banking and investment banking businesses. Universal banks will likely be much more capitalized and carry less risk than before. However both Citigroup and UBS (a Swiss bank) – which are both considered universal banks – have suffered huge losses too.

If people think speculation will be curtailed in a post crisis world think again. Traders will simply move to boutique type operations funded through equity such as hedge funds. We’ll still hear about a 30-year-old making a 50 million dollar bonus in a year, although not at banks so much. They will simply be operating out of hedge funds.”

Now just as an alternative here is someone who actually knows what they are talking about.

Advertisements

Responses

  1. Prompt Corrective Action is a US federal law mandating progressive penalties against banks that exhibit progressively deteriorating capital ratios. At the lower extreme, a critically undercapitalized Federal Deposit Insurance Corporation (FDIC)-regulated institution (i.e., one with a ratio of total capital / assets below 2%) is required to be taken into receivership by the FDIC in order to minimize long-term losses to the FDIC.[1] The motivation behind the law is to provide incentives for banks to address problems while they are still small enough to be manageable. Spong (2000, pages 90–95) summarizes the details (http://www.kc.frb.org/home/subwebnav.cfm?level=3&theID=9771&SubWeb=2).
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    So it was absolutely mandated that all these “too big to fail” institutions be sent into receivership. Paulson was acting ruthlessly outside the law, and Geithner has continued with this illegality.

  2. Excellent news from Utah

    http://www.zerohedge.com/contributed/utah-monetary-declaration-freedom-tyranny-central-bankers

    Also there will be a debit card system set up in Utah. With a gold and silver depository. If we know what is good for us, we ought to hurry up and set up a similar system in New South Wales.

  3. “If we know what is good for us, we ought to hurry up and set up a similar system in New South Wales.”

    Go ahead and show us all how it’s done, Bird.

    I DON’T HAVE THE RESOURCES TO WIN POLITICAL OFFICE IN NEW SOUTH WALES!!!!!

    DON’T BE AN IDIOT CAMBRIA. MY CONTRIBUTION IS SIMPLY EDUCATION, EDUCATION, EDUCATION.

  4. “DON’T BE AN IDIOT CAMBRIA. MY CONTRIBUTION IS SIMPLY EDUCATION, EDUCATION, EDUCATION.”

  5. Right.

  6. Treasury Secretary Timothy Geithner said.

    “Financial crises are ultimately resolved when governments and central banks succeed in creating the conditions that make it compelling for investors to take the risks involved in lending to governments and to banks,”

    Read more: http://www.upi.com/Business_News/2011/12/07/Geithner-to-press-Sarkozy-to-end-crisis/UPI-67891323246600/#ixzz1gFP7NecG

  7. Graeme, have you seen John Humphreys’ article about FRB? Jason linked it on the Open Thread.

  8. Which thread is that?

  9. “Which thread is that?”

    Geez you’re a dim bulb, was it so hard for you to look in the current catallaxyy open forum?

    http://johnhumphreys.com.au/2011/12/10/the-unforgivable-stupidity-of-the-anti-banking/

  10. I’m struggling to see what his argument is.

    “So why would you be willing to exchange $50 of base money for $50 of credit? Probably because it is (1) safer from thieves; (2) more convenient for transactions; and (3) the bank may offer you interest. But for whatever reason, when you deposit with a bank you are engaged in FR-banking and the creation of credit.”

    He’s so fucking thick. We accept it because we have no choice. The ponzi-scheme has been cartelised and subsidised. So to not accept this would (under the current crony-socialist setup) impose costs on us. We don’t feel we face losing our money, because of the daily credit subsidy, and the cartel-loving regulations, suggest that we are secure storing value in this way.

  11. HAHAHAHAHAHA THAT IDIOT CAMBRIA HAS JUST IMPLIED THAT THIS BANK-CASH-PYRAMIDING ACTUALLY ADDS VALUE AT THE SOCIETAL LEVEL. WHAT A FUCKING STUPID WOP.

    PONZI-RACKETS …. ADD VALUE. I THINK HE BELIEVES IT. I DON’T THINK ITS JUST HIM BEING A SLIMY CUNT. YES CAMBRIA IS SLIMIER THAN A BRAN TURD. BUT I REALLY THINK HE BELIEVES THAT PONZI-RACKETS ADD VALUE.

    NOW WHAT IS THE ARGUMENT OF THE IDIOT HUMPHREYS, THAT YOU OTHER IDIOTS FIND SO COMPELLING?

  12. Alright. I got a proxy number and posted the following. And I was not surprised to see that the gutless ignorant, and totally unrepentant irrationalist has everyone on moderation for this debate. Here is the version I have just posted. You aren’t going to get any straight answers out of this moron. Its going to be global warming all over again:

    Your comment is awaiting moderation.

    Where is the legal argument? The utilitarian argument? The clarity in property rights argument? I’m struggling to see what your argument(s) are.

    “So why would you be willing to exchange $50 of base money for $50 of credit? Probably because it is (1) safer from thieves; (2) more convenient for transactions; and (3) the bank may offer you interest. But for whatever reason, when you deposit with a bank you are engaged in FR-banking and the creation of credit.”

    We accept it because we have no choice and it would be a cost-imposition upon us NOT to accept it, under the current circumstance. The ponzi-scheme has been cartelised and subsidised. To not accept the situation you so misleadingly outline, would be to walk away from a subsidy. A subsidy that has driven all competitors to the cartel out of business. This is like asking why Gresham’s law exists? Why would we not stop all commerce until the best coins came along. The unclipped coins? Of course we will accept what we have available to us.

    So to not accept the bankers subsidised and cartelised ponzi-racket would (under the current crony-socialist setup) impose costs on us.

    But most importantly: We don’t feel we face losing our money, because the daily credit subsidy that the banks receive, the massive cash injections they get whenever they are feeling shaky ……. and the cartel-loving regulations, suggest that we are secure storing value in this way.

    Did you think this was a MYSTERY did you John? Its no mystery why we accept it. See you are ignorant. You ask a question, you ought to be able to answer the question accurately that you asked.

    Now can you tell us, after all these years, what are your arguments in favour of the fractional reserve system, as opposed to 100% backing!!!!!

    Spill it.

  13. Pretty accurate comment here:

    “I was thinking about it all day and then it hit me. bird of course is right. The Fed has lent the banking system $30 trillion dollars and I would never have believed it unless the professor of monetary economics, Graeme bird had found it by sleuthing his way through you tube vids while taking his weekly bath.

    He’s perhaps the best monetary economist the world has ever seen… our mufti of banking.”

    Its around 24 trillion and counting. Reasonable people have a right to dispute some things included in these tallies. Historically the Government Accountability Office found 16 trillion in subsidised loans. 24 trillion is an estimate extrapolating from that. But of course we must be careful, because these ought to be seen as really per-year subsidised interest rates, and if you do it that way you may wind up with a whole different set of figures.

    I’ve heard an estimated 37 trillion when you throw in the Eurozone, Swiss, and Pound Sterling territories as well. Any way you square it its a massive financial sector heist. Growing by trillions all the time, and since the banking cartel controls the politicians, its hardly surprising that these are only informed estimates, and not rock solid figures.

    Ron Paul pointed out that it was always easier for him to shake the CIA down for information than it was to get information out of the Fed. That is the world we live in.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: