Wednesday, May 06, 2009
No way out?
Zero Hedge: Fingers and Dikes
Encouraged by Drewster's positive feedback think a few of you will enjoy this article which is one of the best I've read on Fed Intervention and likely consequences. I think the hint is that the problem is way too big even for the FED and that efforts will eventually fail and we will have out global depression whether we like it or notl.
Also that the govt sponsored rally in equities is not backed by an improvement in the bond market - where investors are still not buying the green shoots. The drop in Libor, one of the touted green shoots is a function of fed intervention and not reflected in the commercial bond market.
Posted by bellwether @ 10:29 AM (458 views) Add Comment
2 Comments
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1. mountain goat said...
Great post Bellwether. You almost feel sorry for the Fed struggling to prop up the financial system.
Recently I have been wondering if all this distressed debt being piled onto the Fed will reach a point when the market realises sorry the Fed is broke. These distressed debts are called assets, a form of money. But the trillions are just numbers on a screen. There is a huge disconnect with paper dollars which have been printed. In fact there probably isn't enough paper to even do this. I read somewhere "Stack up briefcases filled with $100 bills to equal Obama’s assorted bank bailouts, stimulus packages and proposed $3.6 trillion budget, and the briefcases would reach so high into the atmosphere that they would constitute a hazard to satellites."
The electronic numbers of dollars are experiencing massive inflation, but when the SHTF like it did in 2008, short term T Bills, paper notes and coins will be hoarded and experience deflation. This is something Antal Fekete has been saying for years for example in this article after the Northern Rock crash Can we Have Inflation and Deflation All at the Same Time?
2. bellwether said...
Thanks MG, the following is a decent companion but can't post it for some reason. It focuses on what is rotten within the banks and why the efforts to hide this will come unstuck.
Maybe I'm feeling bearish because I just added to my long positions - a sure sign that the rally is about to end!
http://seekingalpha.com/article/135642-independent-analyst-numbers-far-uglier-than-official-stress-test-rumors?source=feed