Hussman Weekly Market Comment: A Blueprint for Financial Reform
The tape that plays in Ben Bernanke's head appears to be a rather short phrase "We let the banks fail during the Great Depression, and look what happened." And then the tape repeats. The difficulty is that this story line ignores the distinction between a disorganized unwinding (e.g. Lehman) and a straightforward receivership process (e.g. Washington Mutual). We do not need to avoid bank "failures," nor does the public need to protect large banks under the illusion that they are "too big to fail." What we need is a well-organized capital market where individuals who accept risk actually bear the cost when those risks go awry. To create any other system is to sponsor a cycle of recklessness and constant misallocation of capital.
The only thing that the Bernanke-Geithner team has done is to defend the bondholders of mismanaged financial institutions - making them whole while ordinary citizens continue to lose their jobs and homes. This defense of bank bondholders has contributed to a $3.62 trillion increase in the quantity of government liabilities (Treasury securities and monetary base) issued to the public over the past two years. This represents a 61% addition to the entire quantity of publicly held government liabilities that the
There are far more thoughtful, principled candidates for leadership of the Federal Reserve and the U.S. Treasury. Martin Feldstein comes immediately to mind, though his conservative leanings toward tax policy may make it difficult for a Democratic administration to advance him as a choice. Paul Volcker, though perhaps not in the running himself, doubtless would be able to identify more principled leadership than Bernanke. Wall Street would survive his loss - though there are large problems in the pipeline whose effects might be mistakenly attributed to worries about Bernanke's replacement in any event (as I suspect was the case last week).
Finally, with due respect to Warren Buffett who, when asked about Bernanke's possible non-confirmation, answered "Let me know a day ahead of time so I can sell some stock," I suspect that a full completion of that sentence would have been "specifically, Wells Fargo." Without a doubt, Bernanke has been a great benefactor of bank stockholders and bondholders. This does not mean that his policy approach has been good for the country. The full assessment of Bernanke and Geithner's impact on the
- Hussman Weekly Market Comment: Market Internals Suggest A Shift To Risk-aversion
Market internals deteriorated sharply last week, following an extended period of overvalued, overbought, overbullish conditions where interest-sensitive sectors have been under considerable pressure. At present, the line of least resistance appears downward....
- Tradewinds - David Iben’s May 2011 Commentary: Weird Science
Link to: Weird Science - by David Iben ……….Excerpt:Just as the boys were inspired by the movie Frankenstein, one cannot help but imagine a younger Bernanke, back in 1985, watching Weird Science and hatching a plan to use a few computer models, some...
- Hussman Weekly Market Comment: "should Come As No Shock To Anyone"
Increasingly, the Fed has decided to forgo the idea of repurchase agreements (which require the seller to repurchase the security at a later date), and is instead making outright purchases of the debt of government sponsored enterprises (GSEs such as...
- Hussman Weekly Market Comment: The Destructive Implications Of The Bailout - Understanding Equilibrium
One of the features that has enabled the bureaucratic abuse of the public during the past year has been the frantic, if temporary, flight-to-safety by investors. The Treasury has issued an enormous volume of debt into the frightened hands of investors...
- Jean-marie Eveillard On Wealthtrack
Jean-Marie Eveillard with another appearance on WealthTrack: VIDEO 1/25/08 and TRANSCRIPT.....CONSUELO MACK: Jean-Marie, when you were here last in October, you mentioned the fact that there was something called, that Paul's talked about a lot, the...