17 March 2012

When the Abuse of Insider Information and Control Grows So Large as to Become the Market

"This is a ‘bubble ready’ financial system, and will continue to produce bubbles until it is reformed. The financial sector is primarily a wealth transference mechanism. And with the productive economy foundering because of gross mishandling over the past twenty years or more, the sector is transferring wealth from the future of the economy in the form of Treasury debt to the monied interests on Wall Street in the form of asset bubbles, bonuses and fees."

Jesse, Enjoying Coffee In the Lodge with Jesse by Ilene

I started to think along these lines a few years ago, during the long stock and housing bubble expansion in the stock market that led up to the financial collapse. And we must certainly thank Mr. Greenspan and his Fed for that, as it is clear they knew exactly what was happening. And rather than fulfill their pledge to stop it, they aided and actually promoted it.

What is shocking is that these are no longer rogue operations, no statistical outliers, no isolated dirty dealings by obscure hedge funds.

The moral hazard and decay has progressed so far, has tainted so much, that the US markets are not even worthy to be called casinos, much less captial management and efficient allocation mechanisms.

They have become abattoirs where the real wealth of the nation is taken and slaughtered. These fellows produce nothing, create nothing, except for fraudulent conveyance to take other people's wealth.

There is no better example of this than MF Global, but you can trust your instinct, that there will be more. The blood feast has only begun.

Wait until the wiseguys start skinning their own, those who think they are going to profit from this because they are smarter and better than the rest, and on board. Then you will real some real howls of outrage. I just wonder if there will be anyone left to care.

"Indeed, the market backdrop has regressed to little more than a “money” game. Speculative dynamics rule, and those that play (or associate with those that play) the game the best attain unimaginable financial wealth. How can one reasonably do analysis these days when so much depends on the extent to which global central bankers will proceed further down the path of unlimited “money” creation?

Do you want to bet that the Fed (and ECB, BOE, BOJ, PBOC, etc.) is largely through its crisis-induced money creation operations? Or is the Fed’s balance sheet on the way to $10 TN? Those provide two altogether different scenarios to contemplate.

Clearly, with central bankers propping up markets with Trillions of liquidity injections, one can toss traditional analysis (and market participant behavior) out the backdoor."

Doug Noland, Credit Bubble Bulletin