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Death Spiral Aversion: Wall Street and the Fed, Together Again

Money to burn"The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets," declared the Federal Reserve in a statement issued before the markets opened Friday morning. That's a nice way of saying the Fed, along with central banks of other countries, was going to pour caverns full of money onto the banking system (read that, "Wall Street") to stop the stock market death spiral that had been going on all week. (This statement is eerily similar, by the way, to the one by the Fed during a hurricane down market in 1987, when the central bank declared that it "...stands ready to provide sufficient liquidity" to the markets, thereby promising in that case, too, to bail out failing economic policies of a Republican administration.)

In three shots on Friday, the Fed pounded a total of $38 billion into the banking system; and after violently whipsawing down and then back up, the stock markets finished Friday just about flat.

Forget for a moment that what the Fed is doing is trying to inflate away a market crash. For the time being, we should hope only that the central bank and its friends around the world are ready to blow $40 billion every trading day to keep the welfare train on track for the Wall Street boys. It's a win-win situation: the fatcats keep their money, the suckers take the losses, the Bush Administration keeps its hero status for the rich, and the Fed maintains its reputation as both the enabler and the drug dealer for all the liquidity addicts and their conjoined Republican incompetents.

The only losers are the common people, who will suffer the inevitable inflation resulting from those massive shots of money being poured into the banking system. They'll see higher prices, and they won't see higher wages and salaries to buffer the aggregate price level shockwave. Old-time neo-Keynesian aggregate demand stimulus jockeys would dab tears from their eyes at the money junkies who call themselves modern conservatives.

But, then again, who cares about the middle class and poor people, anyway? Some of them are Democrats; most of the rest of them are intergenerationally too stupid to figure it all out. Either way, they're going to get their financial backsides kicked no matter what happens next.


The Dark Wraith recommends that readers write their congressional representatives. (And be sure to thank them for pretending you matter.)

18:37:44 on 08/10/07 by Dark Wraith - Category: Economics Share this article with an AddThis Social Bookmark

Comments

Wrote Father Tyme:

DW,
With my tin foil hat super glued to my head, how difficult would it be to contrive a situation like this; not necessarily every couple of years but maybe every 15 to 20?
It would seem to be somewhat easier to control than, say, flying planes into buildings and pretending the guy next door did it.
And before anyone suggests that it might be too big a secret to keep, remind yourself of the names Libby, Gonzo, North, Ehrlichman, Mitchell...

       Posted on 08/10/07 at 19:50:53 •

Wrote Dark Wraith:

Good evening, Father Tyme.

Anything is possible, these days.

On the other hand, I generally subscribed to the old dictum, Never attribute to malice what stupidity can more easily explain.

I must stipulate that, when it comes to neoconnies, and apparently contrary to a fairly rigid rule of quantum mechanics, both malice and stupidity can exist at the same place at the same time.

The Dark Wraith thinks someone should get some photos of the White House before the unprecedented quantum state vanishes in a shower of sub-atomic mentality particles.

       Posted on 08/10/07 at 20:13:01 •

Wrote trog69:

The Dark Wraith recommends that readers write their congressional representatives.

I guess I'll have to write my congressperson; I can't very well CALL them, sans telefono, now can I?

       Posted on 08/11/07 at 05:03:34 •

Wrote trog69:

This little tidbit comes from Slate's War Room so no linky. The article was comments from personnel stationed south of Baghdad, called the "Triangle of Death". This one sums it up:

Sgt. Josh Claeson on how it all feels: "Our basic mission here is to drive around and get blown up."

Hmm, that doesn't sound anything like the soundbites I've been seeing these past few weeks. I can't wait for Petreus' report, especially the way he puts hearts over his I's, steada dots!

       Posted on 08/11/07 at 06:42:50 •

Wrote Father Tyme:

DW,
This is off topic but it seems that not only has the bullshit increased exponentially since the '06 election, but also the egregious actions of this administration.
More has happened to take away our rights in the last year than Bush’s first four.
They seem to be hurrying the implementation of as much change as possible to probably forestall the events of ’08. No election?
It really seems that this is an extremely well orchestrated effort probably by Rove to get the NeoCon agenda in place. I’m beginning to believe that the first four years were simply a smoke screen to distract us from their intentions; and it worked.
If you listen to Bush’s almost ridiculous comments from an outside point of view, he doesn’t actually say many times that things in Iraq are going well. He says things like, "Our new strategy is delivering good results." He never specified WHAT the strategy is he’s talking about. It’s possible that strategy is to pretend concern for Iraq while not really lying about his actual intentions. His strategy is to pull something else off that we don’t know about.
Am I making this understandable?
“Brownie’s doing a heck of a job” “Gonzo has my full support”. He’s not telling the American people that Brown did the job the PEOPLE expected, but Brown did the job BUSH expected; sink New Orleans. We stupidly presumed he was referring to the fact that Brown screwed up when in reality, mission accomplished.
Gonzo isn’t just doing what the people are to expect, he’s doing exactly what Bush, Cheney and Rove want; and doing it well. And we think Gonzo’s an ass.
I may not have couched this correctly but if you look back at Bush’s statements and substitute the thought that there was a secret plan all along, it looks as though Bush was telling the truth, but for HIS agenda and the people thought he was being stupid.

Anybody?

There seems to be a lot of soy under that top layer of steak in the diner. And not too many cherries under the whipped creme on the pies anymore.

       Posted on 08/11/07 at 16:06:14 •

Wrote Phydeaux Speaks:

Greetings, Father Tyme.

I have had those same thoughts for some time now. Especially when watching Garbonzo "testify" in front of the Congresscritters.

With all that has happened during the malAdministration of GWB, we are well and truly intercoursed!

       Posted on 08/11/07 at 16:56:58 •

Wrote trog69:

Good evening, Fellers.

I don't know about anyone else, Padre, but I grok where you're coming from, Daddy-o. I would say, though, that Bush has all kinds of 'people' who attempt to script his every comment, according to how his attorneys wish to corral the argument. It's when he tries to put it in his own words that the fun begins.

       Posted on 08/11/07 at 18:44:00 •

Wrote trog69:

DW, Am I correct in thinking that you're referring to the "BreckBoy" in the cartoon you referenced? Regardless, He really, really has to kill that meme dead. The more people that recycle that image of Edwards, the more legitimacy it's accorded. It's almost like 'mini-swift boating'.

With little hamsters water-skiing behind the swift boats...wearing teeny-tiny goggles...and itsy--bitsy speedos. And waving at the crowd. Oh yeah!

       Posted on 08/11/07 at 18:55:40 •

Wrote Deb:

Re the cartoon, as JurassicPork noted, Elizabeth is considered the least feminine of the two, more focused and directed, but that isn't the point. It's interesting how people forget that big settlement he won, I doubt if the opposing counsel thought he was anything but a pit bull. It's also interesting how for the '04 election he was portrayed as a good looking playboy and someone the women would go for, framing is more important than substance, but then isn't that what your observation on the North Pole was about? Sort of.

I've been a lazy girl spending my time on Google Reader, I read the articles and miss the great comments. My bad. Father Tyme, you are correct. Some of us think that everything is going according to plan. The plan to destroy what's left of the US.

       Posted on 08/11/07 at 20:14:56 •

Wrote Oddjob:

While in no way disagreeing, I have a question, DW. If the Fed did nothing and allowed the consequences of their foolish choices to actually be visited upon the fatcats, would that create a situation worse for the poor & middle classes than the one we're faced with?

       Posted on 08/12/07 at 09:11:40 •

Wrote Dark Wraith:

Good afternoon, OddJob.

At this point, as I noted toward the end of the article, the poor and middle class are going to get hurt in any event. It's only a matter of the speed with which the damage is going to be done.

More importantly, though, while public policy requires that action be taken, there's a vast difference between a bailout like the one that's going on right now and an institutional overhaul, which would start–not get slapped on as a half-hearted, maybe-kinda afterthought–regulatory reconstruction, civil and criminal penalties, laws regarding who may and who may not participate, and wholesale rejection of the myth of effective "self-policing."

While I'm at it, a whole lot of good is done for market focus on proper behavior when a truckload of individuals who caused this mess get put on public display in trials that end with rough prison sentences. And that means cleaning out the pigsty-excess mentality at heretofore non-transparent, largely unaccountable places like GNMA and Freddie Mac.

It also means turning Glass-Steagall back on with the same technologically sophisticated vengeance of 21st Century jackboots being put on private citizens; and it means making antitrust laws as they should apply to financial institutions something other than the antiquated, unused (and somewhat unusable) jokes into which they've turned over the past three decades. (That last matter requires, among many other things, that the myths surrounding the so-called "fiasco" of the breakup of Ma Bell be once and for all trounced into the dirt so we can get down to a realistic talk about well-planned divestitures and the necessity of permanent, follow-on oversight to ensure that reconsolidation not only doesn't occur, but is also economically undesirable by market participants.)

We have a slap-together quick-fix going on, OddJob. It's not going to solve the underlying problems, and we're going to have this happen again: sooner, the next time; uglier than this round, the next time; and quite possibly catastrophic, the next time.

I've addressed this matter in other political dimensions: we have all these Democratic candidates for President, and we have a Democrat majority in both houses of Congress, yet we hear not one word about a comprehensive, unflinching, iron-fisted crackdown and look-back at what this venal Administration has done to this country, to the rule of law, to our constitutional protections, and to countless victims around the world of unspeakably violent treatment at our hands. We pretend we can just move on, learn a few lessons, and act like nothing fundamental needed to be faced head-on and repaired.

And in so failing our moral responsibilities to deal with the ugly rot from which arose an outrage, we ensure it will be repeated; and in our time, each successive failing will come at greater risk to the very survival of the Republic.

The Dark Wraith has thus ranted.

       Posted on 08/12/07 at 11:48:36 •

Wrote Oddjob:

We have a slap-together quick-fix going on, OddJob. It's not going to solve the underlying problems, and we're going to have this happen again: sooner, the next time; uglier than this round, the next time; and quite possibly catastrophic, the next time.

Ah, I get it. The Fed. is doing the same "heck of a job" FEMA has done post Katrina!

       Posted on 08/12/07 at 14:35:10 •

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Quoth the Dark Wraith

The Federal Reserve is holding its annual conference, and Chairman Ben Bernanke is doing a fast two-step. The anti-inflation hawks know very well that the massive overhang of liquidity the Fed has pumped into the economy, first to keep it alive during the Bush Administration, and now to keep it from rotting under the Obama Administration, will sooner or later come back as a price spiral like none we've seen in decades. On the other side are all the howlers pounding their fists for the Fed to crank up the money-printing engine to keep the economy from going into total zombie mode. The Fed has dug its own grave, and now Uncle Bennie has to live with the consequences of years of irresponsible monetary policy that has coddled years of irresponsible federal taxation and spending decisions.

Never mind all of that, though. Speaking as an unforgiving, ill-tempered economist who has a darned good track record when it comes to doom and gloom predictions about economic matters, I have some simple advice for the Mr. Bernanke about that conference the Fed is conducting right now:

Mr. Bernanke, your institution is sponsoring the annual Fed conference in Jackson Hole, Wyoming, a really upscale mountain resort favored by fancy people with lots of money and too much time on their hands spent in out-of-the-way mountain resorts. I passed through Jackson Hole once. It was ridiculously arduous getting there in the kind of car I drive, everything was obscenely expensive, and the town was nothing but a compressed mish-mash of ludicrously fancy shops, salons, restaurants, and assorted other businesses that no normal person should spend money patronizing.

Ben, you and your fellow Federal Reserve people have no business being there spending public money on such lavish excess.

Right down the street from where I live are some excellent, big, cheap hotels. The Motel 6 could handle all you Fed people and a bunch of slavish reporters, as well. Right across the street is an all-night Denny's restaurant where you could eat, talk, and make important decisions over Grand Slam breakfasts and nightly burgers. Nearby is a Walmart and a Dollar Tree where you and your people could get souvenirs. And if you're into that kind of thing, there's a huge truck stop less than a mile away, out by the interstate, where you could hook up with some skinny lot lizards who'd be quite impressed with your credentials, if not your more southerly endowments.

Next year, Ben, call me. I'll take care of all the arrangements, here. I'll even talk to the graveyard shift manager at Denny's (he's a former student of mine) to make sure you get the royal treatment. Ditto for the girls at the truck stop (who aren't former students of mine, at least to my knowledge).

I'll be waiting for your call, Ben.

Sincerely,
Dark Wraith

The Art of Grousing

August 11, 2010 — A large can of green beans, mixed with some instant mashed potatoes. That's what I had for dinner. It was pretty darned good and quite filling. In fact, considering that I eat very little anymore, it was too filling. WAY too filling.

I'm sitting here in actual, serious discomfort thinking to myself, "Any minute, I need to detonate or something," and if those stupid instant mashed potatoes were over-salted like so much packaged food is, these days, I'm going to start swilling water and then be writhing on the floor going, "GHAAAA!"

I should have eaten just the green beans, but NO! I had to see that packet of mashed potatoes in the back of the cupboard and go all fancy with my meal, tonight. So much for doing anything for the next couple of hours except making "GHAAAA!" sounds and weirding the cats.

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Washington Monthly has just caught up with a rather troubling trend sweeping the nation's cash-strapped school systems: kids being required to bring their own toilet paper to school. As some commenters there noted, this nonsense has been happening for at least several years in some school districts, but it is apparently now becoming so common that a few national media outlets are publicizing the disgraceful situation.

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This is a somewhat long but outstanding article by the senior editor of Alternet: "In This Article, I Show How Easy It Is For Peaceful People to Violate the Patriot Act and Face 15 Years in Jail." The analogies and examples are well crafted and serve, by the end, to demonstrate just how far from the constitutional right of "free speech" the U.S. Supreme Court has taken us and how the Patriot Act has become a force contrary to American citizens' work in conflict resolution. Along the way in the article, note that it was the Department of Justice under our current U.S. Attorney General, Eric Holder, that successfully argued the case for repression of free speech before the Right-wing Supreme Court. (Also note that the writer managed to slip in the irony of how those same extremists on the high court have now recognized a free speech "right" of corporations at the same time the right accorded citizens is being truncated.)

About the Forums

This blog offers Internet travelers a place where they can discuss economics, finance, politics, and other topics of scholarly and practical interest to thinking people. Your comments are always welcome, and your visits are most appreciated.

About the Publisher

The Dark WraithYour host of this Weblog is an award-winning college teacher and writer who specializes in economics, finance, mathematics, business administration, computer hardware and software skills, and English grammar and composition. His extensive writings on the history of the English language appeared on About.com in the avatar of the Selig Wraith in the Medieval History Forum. Under the umbrella of Dark Wraith Publishing, he now writes on economics and politics as the Dark Wraith, serving as editor and publisher of this online magazine, The Dark Wraith Forums, as well as the group Weblogs Big Brass Blog and The UnCapitalist Journal, in addition to the blogScream News Wire service.

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