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Submitted by Tomas Salamanca via the Ludwig von Mises Institute of Canada,

Until recently, Alan Greenspan’s main argument to exonerate himself of responsibility for the 2007-2009 financial crisis has consisted in the claim that strong Asian demand for US treasury bonds kept interest rates on mortgages unusually low. Though he has not given up on this defense,  he is now emphasizing a different tack, as manifest in an article published in the current issue of Foreign Affairs. The article captures key themes elaborated in his latest book on the problem of forecasting, The Map and the Territory. His new tack is no better than the old tack.

Reprising what has lately become a very common refrain in financial commentary, Greenspan points the finger at the emotional side of human nature. This is the side where behavioral economics has recently made a name for itself in formulating its accounts of investor behaviour. Actually, this approach has a much older provenance, most famously conveyed in Keynes’ invocation of “animal spirits” in the General Theory of Employment, Interest, and Money.  On the Keynesian view that behavioral economics adopts, investors do not buy and sell securities by rationally processing all available information and calculating expected returns. Rather, their decision making is distorted by cognitive biases and swayed by the oscillating passions of fear and hope.

In Greenspan’s rendering of the “animal spirits”, investors swing between phases of risk loving and aversion. Greenspan also maintains that “animal spirits” show themselves in herd behaviour. Inasmuch as investors take their cues from others, they tend to be either risk loving, or risk averse, all at the same time.  You know where all this is going with respect to the financial crisis. According to Greenspan, the herd on Wall Street bought up mortgage backed securities while underestimating their risks, and then as soon as those risks became all too clear, everyone headed to the exits simultaneously.

No doubt, an understanding of human psychology is helpful in making sense of economic phenomena. But we have to be precise in distinguishing the role of psychology in economics. As Mises argued, economics is a deductive science. All its conclusions ultimately proceed from the axiom that human beings act by choosing between alternative means to realize their subjective ends. All the psychology that economics needs is the rather obvious proposition that an overriding goal of human beings is the quest to attain a more favorable state of affairs in their lives. Only when the attempt is made to illustrate the operation of economic principles in the real world, as happens when one is engaged in the writing of economic history,  does psychology become illuminating. A psychological analysis might, for example, tell us what goals a particular individual or group are pursuing as well as the degree to which they prioritize considerations of the present over those of the future. Psychology can help economists tell richer stories; it cannot help them derive better economic theories.

Still, this is not the most significant of Greenspan’s errors. Yes, very few people are truly independent thinkers. Not being confident in any opinion unless it is socially confirmed somehow, people are inclined to think as others around them do.  And so, yes, this means human beings are subject to herding behaviour. Yet in order for a herd to develop in favor of some opinion, such as that sub-prime mortgage securities are a great investment, that opinion must initially gain traction. This is what Greenspan’s account is missing. He seems to think that investor herds come out of nowhere, mysteriously emerging more often than would be expected from a bell curve distribution of asset price changes. How, in other words, did sub-prime mortgage trend higher in the first place so as to generate all the enthusiasm it subsequently attracted?

The answer, of course, involves the loose monetary policy that Greenspan himself ran in the 2000′s as chairman of the Federal Reserve. By injecting so much money into the financial system, he supplied market participants with the means of raising the demand for financial assets. By greatly reducing the yields on low risk government bonds, Greenspan shifted that demand towards higher risk mortgage securities offering more appealing rates of return. Yield spreads narrowed between private sector and government bonds. Concomitantly, there was a steady upward movement in the prices of mortgage bonds, which the “animal spirits” then exacerbated through investor herding.

So if Greenspan hadn’t run an easy money policy in the first place, there would have been nothing in the mortgage arena for the “animal spirits” to have latched onto. This is always the case with financial asset bubbles. Excess hope only comes into play after the central bank has set the boom in motion. Excess fear is the inevitable follow-up once the bubble is popped.

Ironically enough, we can appeal to psychology to explain why Greenspan is unable to recognize this point. Human beings are strongly inclined to maintain their self-esteem. Admitting your own complicity in one of history’s greatest financial crises goes against that fundamental drive. Greenspan would be well advised to apply psychology not just to others, but to himself.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7ihLeqqQiD4/story01.htm Tyler Durden

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fZ51JtLnuiQ/story01.htm George Washington

Photoshopped or not, in a world of constant propaganda and doublespeak, the following ad seen in Egypt is a welcome respite in the world of bigger and bigger lies…

 

(via @SandMonkey)

What we think they meant is  – and perhaps with a nod to this blog (and other non-mainstream media) “the pen is mightier than the sword”

 

Perhaps the Samsung International folks have been watching old SNL re-runs…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mymIabW2y40/story01.htm Tyler Durden

The Fed’s Catch 22 just got catchier. While most attention in the recently released FOMC minutes fell on the return of the taper as a possibility even as soon as December (making the November payrolls report the most important ever, ever, until the next one at least), a less discussed issue was the Fed’s comment that it would consider lowering the Interest on Excess Reserves to zero as a means to offset the implied tightening that would result from the reduction in the monthly flow once QE entered its terminal phase (for however briefly before the plunge in the S&P led to the Untaper). After all, the Fed’s policy book goes, if IOER is raised to tighten conditions, easing it to zero, or negative, should offset “tightening financial conditions”, right? Wrong. As the FT reports leading US banks have warned the Fed that should it lower IOER, they would be forced to start charging depositors.

In other words, just like Europe is already toying with the ideao of NIRP, so the Fed’s IOER cut would also result in a negative rate on deposits which the FT tongue-in-cheekly summarizes “depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.”

If cutting IOER was as much of an easing move as the Fed believes, banks should be delighted – after all, according to the Fed’s guidelines it would mean that the return on their investments (recall that all US banks slowly but surely became glorified, TBTF prop trading hedge funds since Glass Steagall was repealed, and why the Volcker Rule implementation is virtually guaranteed to never happen) would increase. And yet, they are not:

Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors.

 

Banks say they may have to charge because taking in deposits is not free: they have to pay premiums of a few basis points to a US government insurance programme.

 

“Right now you can at least break even from a revenue perspective,” said one executive, adding that a rate cut by the Fed “would turn it into negative revenue – banks would be disincentivised to take deposits and potentially charge for them”.

 

Other bankers said that a move to negative rates would not only trim margins but could backfire for banks and the system as a whole, as it would incentivise treasury managers to find higher-yielding, riskier assets.

 

“It’s not as if we are suddenly going to start lending to [small and medium-sized enterprises],” said one. “There really isn’t the level of demand, so the danger is that banks are pushed into riskier assets to find yield.”

All of the above is BS: lending has never been a concern for the Fed because if it was, then one could scrap QE right now as an absolute faiure. Recall that as we showed recently, the total amount of loans and leases in commercial US banks has been unchanged since Lehman, with the only rise in deposits coming thanks to the fungible liquidity injected by the Fed.

Furthermore, contrary to what the hypocrite banker said that “the danger is that banks are pushed into riskier assets to find yield”, banks are already in the riskiest assets: just look at what JPM was doing with its hundreds of billions in excess deposits, which originated as Fed reserves on its books – we explained the process of how the Fed’s reserves are used to push the market higher most recently in “What Shadow Banking Can Tell Us About The Fed’s “Exit-Path” Dead End.”

What the real danger is, is that once the Fed lowers IOER and there is a massive outflow of deposits, that banks which have used the excess deposits as initial margin and collateral on marginable securities to chase risk to record highs (as JPM’s CIO explicitly and undisputedly did) that there would be an avalanche of selling once the negative rate deposit outflow tsunami hit.

Needless to say, the only offset would be if the proceeds from the deposits outflows were used to invest in stocks instead of staying inert in some mattress or, worse (if only from the Fed’s point of view) purchase inert assets like gold or Bitcoin.

Which brings us back to the first sentence and the Fed’s now massive Catch 22: on one hand, shoud the Fed taper, rates will surge and stocks will once again plunge, as they did, in early summer, just to teach the evil, non-appeasing Fed a lesson.

On the other hand, should the Fed cut IOER as a standalone move or concurrently to offset the tapering pain, banks will crush depositors by cutting rates, depositors will pull their money from banks en masse, and banks will have no choice but to close on a record levered $2.2 trillion in margined risk position.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uEeXenBHu3Q/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The constant dismissal of unprecedented extremes as "same as it ever was" is actually a pernicious form of perception management, i.e. propaganda.

Anyone suggesting that things are unraveling in fundamental ways quickly encounters a standard reflex response: "same as it ever was."

Environmental degradation? Same as it ever was: humans have been trashing the environment for thousands of years.

The influence of money in politics? Same as it ever was: money has always been the mother's milk of politics.

The dominance of central bankers? Same as it ever was: the banks and the Federal Reserve have been colluding for decades.

Income inequality? Same as it ever was: there will always be rich and poor, etc.

The rise of the National Security State/Empire? Same as it ever was: Manifest Destiny, etc.

History lessons are all well and good, but this constant refrain of "same as it ever was" is actually a pernicious form of perception management, i.e. propaganda. The claim that "there is nothing new under the sun" (and therefore there is nothing we can do but throw up our hands in passive acceptance of the status quo) may well be true of human nature, but it purposefully masks all the fundamental changes that are not "same as it ever was."

The seas, for example: we're losing the oceans. The scale of destruction is not "same as it ever was." The Consequences of Oceanic Destruction (Foreign Affairs) Over the last several decades, human activities have so altered the basic chemistry of the seas that they are now experiencing evolution in reverse: a return to the barren primeval waters of hundreds of millions of years ago.

Or how about youth employment? Is this "same as it ever was?" Clearly, no. It has entered a new structural decline without precedent.

How about the cost of college tuition? Is this "same as it ever was?" Clearly, no.

How about self-employment? Is this "same as it ever was?" Clearly, no.

How about small business? Is this "same as it ever was?" Clearly, no.

How about labor's share of the economy? Is this "same as it ever was?" Clearly, no.

How about household income? Is this "same as it ever was?" If real income had been declining for the past 50 years at this rate, it would be near-zero by now.

How about the ratio of full-time workers to retirees drawing Social Security benefits? Is this "same as it ever was?" Clearly, no. The ratio is now two full-time workers to one beneficiary, and the Baby Boom has only started to retire. On the employment side, the "end of work" dynamics have only started their creative destruction of jobs. "Same as it ever was?" Not even close.

How about money velocity? Is this "same as it ever was?" Clearly, no.

How about the positive effects of central-state borrowing and spending, i.e. the Keynesian Multiplier? Is this "same as it ever was?" Clearly, no.

 

How about the structural gap between Federal spending and tax revenues? Is this "same as it ever was?" It's easy to project a fantasy-based future in which "deficits never matter" or tax revenues soar even in a stagnant economy beset by skyrocketing Federal retirement/healthcare costs. The desire to believe in fantasies may be "same as it ever was," but the fiscal reality is not.

How about the nation's monetary base? Is this "same as it ever was?" Clearly, no.

How about corporate profits? Is this "same as it ever was?" Clearly, no.

How about the correlation of the Federal Reserve balance sheet and the S&P 500? Is this "same as it ever was?"

How about the gap between nominal new highs in the stock market and the real (inflation-adjusted) stock market? Is this "same as it ever was?"

How about the number of times per week that a representative of the Federal Reserve gives a speech whose implicit message is the importance of the Federal Reserve? Is this "same as it ever was?" Did Fed-Heads fan out every week 20 or 30 years ago to deliver dozens of speeches and media appearances? The answer is no; so what are these people selling that they have to do their shuck-and-jive act so repetitively? What sort of desperation is driving this full-court press of propaganda?

The desperation is obvious, and so is the agenda: mask the reality that things are unraveling, and that it's no longer "same as it ever was."

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AB4UkZg3p4Q/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The constant dismissal of unprecedented extremes as "same as it ever was" is actually a pernicious form of perception management, i.e. propaganda.

Anyone suggesting that things are unraveling in fundamental ways quickly encounters a standard reflex response: "same as it ever was."

Environmental degradation? Same as it ever was: humans have been trashing the environment for thousands of years.

The influence of money in politics? Same as it ever was: money has always been the mother's milk of politics.

The dominance of central bankers? Same as it ever was: the banks and the Federal Reserve have been colluding for decades.

Income inequality? Same as it ever was: there will always be rich and poor, etc.

The rise of the National Security State/Empire? Same as it ever was: Manifest Destiny, etc.

History lessons are all well and good, but this constant refrain of "same as it ever was" is actually a pernicious form of perception management, i.e. propaganda. The claim that "there is nothing new under the sun" (and therefore there is nothing we can do but throw up our hands in passive acceptance of the status quo) may well be true of human nature, but it purposefully masks all the fundamental changes that are not "same as it ever was."

The seas, for example: we're losing the oceans. The scale of destruction is not "same as it ever was." The Consequences of Oceanic Destruction (Foreign Affairs) Over the last several decades, human activities have so altered the basic chemistry of the seas that they are now experiencing evolution in reverse: a return to the barren primeval waters of hundreds of millions of years ago.

Or how about youth employment? Is this "same as it ever was?" Clearly, no. It has entered a new structural decline without precedent.

How about the cost of college tuition? Is this "same as it ever was?" Clearly, no.

How about self-employment? Is this "same as it ever was?" Clearly, no.

How about small business? Is this "same as it ever was?" Clearly, no.

How about labor's share of the economy? Is this "same as it ever was?" Clearly, no.

How about household income? Is this "same as it ever was?" If real income had been declining for the past 50 years at this rate, it would be near-zero by now.

How about the ratio of full-time workers to retirees drawing Social Security benefits? Is this "same as it ever was?" Clearly, no. The ratio is now two full-time workers to one beneficiary, and the Baby Boom has only started to retire. On the employment side, the "end of work" dynamics have only started their creative destruction of jobs. "Same as it ever was?" Not even close.

How about money velocity? Is this "same as it ever was?" Clearly, no.

How about the positive effects of central-state borrowing and spending, i.e. the Keynesian Multiplier? Is this "same as it ever was?" Clearly, no.

 

How about the structural gap between Federal spending and tax revenues? Is this "same as it ever was?" It's easy to project a fantasy-based future in which "deficits never matter" or tax revenues soar even in a stagnant economy beset by skyrocketing Federal retirement/healthcare costs. The desire to believe in fantasies may be "same as it ever was," but the fiscal reality is not.

How about the nation's monetary base? Is this "same as it ever was?" Clearly, no.

How about corporate profits? Is this "same as it ever was?" Clearly, no.

How about the correlation of the Federal Reserve balance sheet and the S&P 500? Is this "same as it ever was?"

How about the gap between nominal new highs in the stock market and the real (inflation-adjusted) stock market? Is this "same as it ever was?"

How about the number of times per week that a representative of the Federal Reserve gives a speech whose implicit message is the importance of the Federal Reserve? Is this "same as it ever was?" Did Fed-Heads fan out every week 20 or 30 years ago to deliver dozens of speeches and media appearances? The answer is no; so what are these people selling that they have to do their shuck-and-jive act so repetitively? What sort of desperation is driving this full-court press of propaganda?

The desperation is obvious, and so is the agenda: mask the reality that things are unraveling, and that it's no longer "same as it ever was."

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AB4UkZg3p4Q/story01.htm Tyler Durden

The near-term fundamental considerations for the dollar have turned more negative.  Two developments last week that had bolstered the dollar are being rethought.  

 

First, the Bloomberg report that cited to unidentified people close to the ECB playing up the risk of a negative deposit rate, has not been confirmed or replicated by other news agencies, despite the apparent copy-cat reporting that seem so pervasive in the business news space.  Indeed, several key official, including ECB President Draghi himself, played down developments in this direction.  

 

While it is naive to expect an official to deny itself options, a move to a negative deposit rate could be high disruptive for the financial market and banks, who the ECB is supporting with the other hand, without a high probability of boosting lending or deteriorating financial conditions.   Moreover, ECB officials have also downplayed the deflationary threat that many pundits have discussed.  

 

An adoption of such an unprecedented policy requires a significant threat, which policy makers do not perceive.  In fact, the preliminary Nov CPI due at the end of the week ahead is expected to tick up.  This will support the official recognition of disinflation rather than deflation.  

 

Second, the pendulum of market sentiment swung from Yellen’s confirmation hearing, where many took away a ultra-dovish signal, to the FOMC minutes that many read as bringing forward Fed tapering to possibly next month.    Yet the key officials (Bernanke, Yellen and Dudley) have made it clear that the decision to taper requires more economic progress.  And such progress is lacking.  

 

While Q3 US GDP appears set to be revised up to a little more than 3%, the composition, especially the inventory build, may detract from Q4 growth.  The regional Fed surveys for November also point to some softening of the economy.  The Chicago PMI will be released at the end  of next week and it likely to pullback sharply from the heady reading near 66 in Oct.  

 

Our confidence that some compromise on the continuing spending resolution and the debt ceiling that would prevent a new crisis has been shaken by last week’s parliamentary maneuvers, which will likely aggravate the partisan (not necessarily ideological) strife.  

 

The Republicans in the Senate have used their minority status to block not only legislation, but also presidential nominations to an unprecedented extent. Since the country was founded, the Senate has blocked through delay 168 nominees.  Half of these have taken place in Obama’s 5 1/2 years in office.  On Oct 31, the Republicans in the Senate blocked North Carolina Representative Watt from heading the agency that will oversee Fannie Mae and Freddie Mac.  This was the first time in 170 years that a sitting member of Congress was denied a confirmation to an executive branch post.  

 

After threatening to do so earlier this year, Senate leader Reid used his majority to change rules that reduce the obstructionist powers of the minority by requiring executive appointments (not legislation) to pass with a simply majority rather than 60 votes.  The 60-vote requirement has been the case since 1975, when it was reduced from 67.  

 

Reid’s move will allow for some more of the 93 judicial vacancies, including the three on the Federal Court of Appeals for Washington DC, which often rules on challenges to government regulation and presently has a Republican majority,  to be filled in the coming months.  This is important for Obama’s agenda, if he is not to be a lame duck.  It may also expedite the changes at the Federal Reserve Board of Governors, which currently has 2 vacancies and with Bernanke set to step down a third seat open.  Reid’s move may also prevent delay tactics over Yellen’s nomination on the floor of the Senate, which were threatened.   

 

Our analysis suggests that there will likely be a few more vacancies in the period ahead.  These large changes on the seven-member Board of Governors is another reason we argued that from an institutional point of view, it makes more sense to let the new Fed take the next policy initiatives.   

 

The Republicans are incensed by the parliamentary maneuver, though three Democrats voted against Reid’s move.  Relations between the two parties were strained in any event, but Reid’s move may lead an immediate freezing of whatever cooperative efforts may have been taking place.  In particular, this is a new obstacle to a fiscal agreement.  

 

Government spending is authorized until Jan 15 and the debt ceiling is Fed 7.  As will be recalled it is the spending that can lead to a government shutdown and the debt ceiling can produce a default.   While this may still be avoided, the risks that it is not has risen by the internecine conflict.   The Federal Reserve cannot ignore this when it meets in the middle of next month.  

 

Separately, there were two other developments over the weekend that may influence the investment climate. The deal struck over the Iranian nuclear development may prompted some reduction of the risk premium for some oil, including Brent.  Israel’s Prime Minister responded negatively to the news, which may be seen as negative for the shekel.  

 

If the Iranian deal reduces the threat of hostilities, China’s new East China Sea Air Defense Identification Zone threatens to escalate tensions.  China’s initiative is a unilateral attempt to impose new rules on the airspace of the islands who’s ownership is disputed, especially with Japan.  China threatened to take “defensive emergency measures” against aircraft that fail to identify themselves in that airspace.  

 

There was modus vivendi (an agreement to disagree) about the islands until last year, when the DPJ-led government was forced to buy the islands so the Governor of Tokyo acting for the metropolitan government would not.  This in effect nationalized them and drew the ire of Chinese officials, who are particularly sensitive to its territorial integrity for a number of historical and political reasons.  

 

Up until now, the nationalist objectives that Japan’s Prime Minister Abe is believed to harbor, have not been given as much attention as expected.  The economic challenges and political considerations may have kept this part of the Abenomics agenda under wraps, but what understood as provocation by China is likely to stir the pot.  

 

Outside of the advanced euro area inflation report, the economic calendar for the euro area is light in the week ahead.  There are though two political issues to note.  First, the new German coalition government may be announced.  Realpolitik has been at play.  The SPD lost the election handily, but the necessity of its participation meant that it could demand a lot.  Of twelve broad areas, Merkel’s CDU appears to acquiesced to at least ten.  There are some policy difference between Germany’s two main parties, but as we suggest is the case in the US, such differences are not so ideological and the ability to have a grand coalition seems further evidence of this observation.  

 

Second, the Italian Senate is likely to vote to eject Berlusconi.  A few months ago, such an event would have threatened to topple the fragile Letta government.  A split in the center-right in Italy, over personality rather than ideology, indicates the Letta government will survive.  The real challenge for Letta may come from his own party (a leadership election early next month) rather than from Berlusconi, who may be subject to more legal ac
tion when he loses the immunity his Senate seat confers. 

 

We note that at the end of the week, Japan  will report a host of economic data, including the Nov CPI reading (expected to tick up to 0.2% from flat on the core, which is the BOJ preferred measure). Despite widespread skepticism that the BOJ can achieve its 2% target, the BOJ does not seem to be in any hurry to provide more stimulus.   Meanwhile, the Oct Industrial production is expected to have accelerated to 2% from 1.3% in Sept and a 0.9% decline in Aug. Offsetting the economic impact of this will likely be slower household consumption after the out-sized 3.7% increase in Sept.  

 

Finally, the central bank of Brazil is likely to hike the overnight Selic rate by 50 bp to 10%. Although its first hike in April was 25 bp, since then central bank has delivered four 50 bp hikes.  This week will be the fifth. The central bank of Hungary is likely to cut is base rate by 20 bp.  It has cut the base rate 20 bp in each of the past three months.  It has cut the base rate by 25 bp per month in April through July.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/xG_rR8KuKwU/story01.htm Marc To Market

“The world has consumed more than it produced for more than a decade,” Jim Rogers explains to BoomBust’s Erin Ade; but his comments to the leather mini-skirted anchor with regard the actions of the world’s central banks bear the most attention. “The world is floating on an artificial ocean of printed money,” he blasts, adding that while it’s going on “everyone’s happy,” but at the first sign of it slowing, he warns, “we will all dry up.”

Rogers sees gold as a crucial holding in this respect but believes there will be a better price to buy more, as he reflects on the suppressive actions of the Indian government.

This excellent far-reaching interview covers everything from gold standards to China’s 3rd Plenum “I much prefer the Chinese system of open markets than the US with the government dictating everything” and from Bitcoin to a barbaric destruction of the Fed and all it stands for, “the Fed will self-destruct, before the polticians realize what is going on.”

 

Erin Ade… (you’re welcome – is it any wonder Maria B quit?) asks every question we need answered…

 

interviews a worried Jim Rogers…

 

4:30 Agriculture/Farmland – bullish sugar and farmland – “The world has consumed more than it produced for more than a decade,” and inventories are near record lows

6:25 Central Banks – “for the first time in history, all central banks are printing money… The world is floating on an artificial ocean of printed money,”

7:15 Gold – “I am not selling any of my gold, but believe there will better prices to buy… the Indian government is actually trying to make its people sell their gold.”

8:45 Gold Standard – “it might work for a while but eventually the politicians will cheat that too“… “people wil be desperate in the next decade to try anything – maybe it will be bitcoins”

9:40 Bitcoin – there are many more important things in the world than worrying about bitcoins

10:15 China’s Plenum – “the Chinese are becoming more and more capitalist”… they are becoming more and more market focused… as opposed to the US where when there is a problem “the government decides how to fix it… look at Obamacare” – “the government says “we will figure out the solution”… “I much prefer the Chinese system of open markets than the US with the government dictating everything”

15:20 The Fed – “The way the world has worked for a few thousand years is – that when people get into trouble, they fail; competent people come along, reorganize the assets and start over…” In America, he chides, “they decided to let incompetent people take over the assets from competent people and compete with the competent people.” – The Japanese tried this in the 90s and it failed for 2 lost decades.

“In America, they are kicking the can down the road, and when the can finally goes over the side, we are all going to go with it.”

“We’ve had 50-60 years of excess in America, you’ve got to pay the price some day whether you like it or not… the longer they delay the day of reckoning the worse it will be.”

17:40 Abolish The Fed – “the world has gotten along very well for most of history without central banks.”

“we would be better of with no central bank, than this central bank”

19:00 Stocks – “we are certainly gonna have a crash some day” – “as long as they keep printing money, and no restraints on congressional spending, this bubble could go on forever”

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/M3wxA-ya6UQ/story01.htm Tyler Durden