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Why not print money to buy shares to keep the stock market high?

Naughty stolen quote from another poster on another thread. Not sure who - will credit poster in an edit. Edit - was Bobthe-

Possible?

Edited by 29929BlackTuesday

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er yes, that is exactly what has been happening. They are buying billions in Bonds, that is private money being returned to investors. Those private investors put that same money back into shares. Its not direct buying of shares by the government but has the exact same effect.

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Why not print money to buy shares to keep the stock market high?

The obvious answer is moral hazard and accountability. If the shares go down, there will be a case made that this loss has to be paid for in the future - and this is a political kick in the goolies.

Of course, as other posters have mentioned, by supporting the commercial banking system, which - since 1999 - has also included the investment banking system... we are doing this indirectly. The politicians sit behind a thin veneer of respectability as they hand responsibility for investment and asset prices to the banks they underwrite... and, I'm absolutely certain, the investment banks are responsible for a vast amount of leveraged investment... judging by the tiny base rate.

As far as I know, Japan has direct investment into several of its corporations - and, in Britain, our government is invested in at least three major banks. With GM, we will see if the USA will invest in its car manufacturing industry.

While this will rile freemarketeers, I don't think this investment is what matters most (though it stitches up younger generations to serve the desires of the elder) In my opinion... what really matters is control and accountability. If I, as a taxpayer, am a shareholder... how do I hold the management of the banks I own accountable? Sure, it is possible that Brown might make the right decisions - but what if I distrust him for whatever reason? What prevents the appointed directors of state owned companies from giving in to moral hazard - creating spectacular losses and social unrest to advance their private interests?

I think this is why the government is taking a contradictory hands-off, hands-on approach to bank management. Publicly the claim is that it's a bank as normal... but if you look at what is actually going on, the management structure is being replaced. I think it's possible to feel sorry for Brown here (on this specific case) because he's damned if he does and damned if he doesn't... the existing management are known to be inept/corrupt by virtue of insolvency... the new management are state sponsored and doomed to make catastrophic errors at least as significant as their predecessors... because the motivations are still wrong. Previously the motivations were bonuses which paid out if employees increased the systemic risk in the banking system. Now the motivations are political recognition if seen to be supporting the government vision... which, incidentally, is the vision that brought us a regulatory system that was so unfit for purpose that we got into this mess in the first place.

So, in summary... we've a fascist state - but... perhaps there's no better option any more? One thing is for certain, however - given the historic record for the behaviours of fascist states - we need to keep far closer tabs on our politicians. Today, an apathetic electorate spells disaster on a scale unimaginable.

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The obvious answer is moral hazard and accountability. If the shares go down, there will be a case made that this loss has to be paid for in the future - and this is a political kick in the goolies.

Of course, as other posters have mentioned, by supporting the commercial banking system, which - since 1999 - has also included the investment banking system... we are doing this indirectly. The politicians sit behind a thin veneer of respectability as they hand responsibility for investment and asset prices to the banks they underwrite... and, I'm absolutely certain, the investment banks are responsible for a vast amount of leveraged investment... judging by the tiny base rate.

As far as I know, Japan has direct investment into several of its corporations - and, in Britain, our government is invested in at least three major banks. With GM, we will see if the USA will invest in its car manufacturing industry.

While this will rile freemarketeers, I don't think this investment is what matters most (though it stitches up younger generations to serve the desires of the elder) In my opinion... what really matters is control and accountability. If I, as a taxpayer, am a shareholder... how do I hold the management of the banks I own accountable? Sure, it is possible that Brown might make the right decisions - but what if I distrust him for whatever reason? What prevents the appointed directors of state owned companies from giving in to moral hazard - creating spectacular losses and social unrest to advance their private interests?

I think this is why the government is taking a contradictory hands-off, hands-on approach to bank management. Publicly the claim is that it's a bank as normal... but if you look at what is actually going on, the management structure is being replaced. I think it's possible to feel sorry for Brown here (on this specific case) because he's damned if he does and damned if he doesn't... the existing management are known to be inept/corrupt by virtue of insolvency... the new management are state sponsored and doomed to make catastrophic errors at least as significant as their predecessors... because the motivations are still wrong. Previously the motivations were bonuses which paid out if employees increased the systemic risk in the banking system. Now the motivations are political recognition if seen to be supporting the government vision... which, incidentally, is the vision that brought us a regulatory system that was so unfit for purpose that we got into this mess in the first place.

So, in summary... we've a fascist state - but... perhaps there's no better option any more? One thing is for certain, however - given the historic record for the behaviours of fascist states - we need to keep far closer tabs on our politicians. Today, an apathetic electorate spells disaster on a scale unimaginable.

You really need to look at the state as it actually exists, not as the propaganda would have you believe it.

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