Central bankers present themselves as Masters of the Universe. They are, but only in their own little Theater of the Absurd. In the real world, they are as clueless as any other mortals about the unintended consequences of their actions and the speed with which the corrupted, unsustainable financial Status Quo will decay and die.
The only attribute they possess in abundance is hubris. Their claims to godhood are comical when viewed in their little Theater of the Absurd, but they become tragic when the consequences of their actions play out in the real world.
Their job, such as it is, is to deflate a tottering system based on phantom assets slowly enough that it doesn’t implode. Stripped of mumbo-jumbo, their strategy to accomplish this is to inflate other phantom assets to replace the phantom assets that are falling to zero.
All their promises, preening and posturing boil down to patting their breast pocket and speaking vaguely about a “secret plan” to end the crisis without bringing down the system that spawned the crisis as a consequence of its very nature.
There is no secret plan, of course, and no secret financial weapons; all they really have is artifice and the hubris to present artifice as reality.
charles hugh smith
July 31, 2012
The Central Banking Theater of the Absurd
Emphasis in the original.
[In the history books and in stories from my parents I heard of bankers and brokers in 1929 jumping out the windows of tall buildings and utilizing “Smith & Wesson” retirement plans. I don’t hear of that sort of thing these days even though by many measures the financial situation is just as bad or worse as in The Great Depression.
I keep wondering if the reason for the difference is that we have different types of people in the banks and positions of power this time around. The sociopaths don’t care and the Marxists intend for our system to fail.
What I don’t think they understand is that when people get hungry enough they will figure out the reason for the failure of the system, have nothing to lose by going after those responsible, there will be no place to hide, and retirement, in whatever form, will be forced upon those who destroyed the greatest economic and political system the world has ever known.—Joe]
And, on this topic, today is the 100th anniversary of Milton Friedman’s (PBUH) birthday.
I have watched the percentage of bank owned foreclosed homes remain quite high, while the number allowed to be sold on the open market or to investors at foreclosure auctions remains low.
The banks are indeed dribbling out their failed assets in an attempt to avoid crashing the housing market even further in a sudden tidal wave of low priced homes.
They have to do this. The banks would be shut down by regulators if their “assets,” the foreclosed homes they hold, were valued at fair market value, about 50% to 75% of appraised value. The banks assets would not meet regulations regarding asset to liability ratios, which are already quite high.
Likewise, every local and state government that uses property taxes would find themselves in budget crises if home prices were appraised at market value, after release of all the homes held unsold, as “assets,” by banks.
The dribbling out from banks over several years of the homes they have foreclosed on, and continue to foreclose on, is the only way to avoid cratering the economy. That it is a very perceptible drag on the economy is unavoidable and very unfortunate for everyone.
If there is a better way to resolve the decade of fraud that created the housing bubble, let someone know.
I am reminded of certain political figures who claimed that they were the only thing standing between the bankers and a mob.
While that statement may have warned of such a mob when it wasn’t quite immanent, and overstated the power of the person who made the claim, it is a reminder.
People will break things and hang (apparent or actual) scoundrels when hunger and privation push them to it.
And, when that kind of event comes down, there is no guarantee that the outcome will be a better society, government, or market.
Mikee: break up the big banks, don’t allow investment banking by retail banks and vice-versa, let insolvent banks go under and liquidate assets to clear the markets; exile, prosecute, imprison, or hang the fraudsters, change market structures to encourage mostly local banking; eliminate a LOT of laws, but prosecute those on the books more effectively; disallow anyone in the house and senate who were on oversight committees not run for re-election, as they are obviously either conflicted or incompetent; cut total FedGov spending to no more than 18% of the previous year’s GDP, and cap it there; shift from our current tax code to the FairTax to fun all FedGov operations; allow no more FedGov guaranteed loans; eliminate all Czars, reduce the cabinet to no more than 10 positions, and eliminate all departments w/o cabinet posts; cut the size of the EPA by 80%, the FDA by 90%, make the Dept of Ed a small “Ed Research and publication Only” department (i.e., no “operations and grants” beyond doing GOOD education research into what *works*), opening up mining and oil/gas exploration on Federal lands, sell or give to the states most federal lands, disband the BATFE, call off the war on (some) drugs.
doing all that would be ugly short term, but give us a much better foundation.
Heck, just opening up federal lands for drilling and the resultant 20% use tax would create 9 TRILLION dollars in use tax over 20 years. If it was all placed on National DEBT we could pay 60% of it off with those taxes ALONE! Never mind the increased taxes from wages, increased business, fuel taxes, etc.
That and that alone would come close to elimination of the the National Debt!