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Thursday, August 4, 2011



Stocks Hammered Ahead of Friday’s Jobs Report

Stocks Collapse, 2yr @Record Low, Rating Agencies Opinion Irrelavent as Global Capital Jumps from Ponzi Scheme to Ponzi Scheme

Reggie Middleton's picture

Bloomberg reports Stocks Tumble Two-Year Yield Drops to Record Low. It looks as if the short to medium term goals of Geithner and Bernanke may have paid off as the world's capital runs from one Ponzi scheme to another - exactly as I anticipated. 
Go to 21:00 in the video below. Bernanke strategy all along 
I have always been of the contention that the 2008 market crash was cut short by the global machinations of a cadre of central bankers intent on somehow rewriting the rules of economics, investment physics and global finance. They became the buyers of last resort, then consequently the buyers of only resort while at the same time flooding the world with liquidity and guarantees. These central bankers and the countries they allegedly strive to serve took on the debt and nigh worthless assets of the private sector who threw prudence through the window during the “Peak” phase of the circle of economic life, and engaged in rampant speculation. Click to enlarge to print quality…
The result of this “Great Global Macro Experiment” is a market crash that never completed. BoomBustBlog subscribers should reference File Icon The Inevitability of Another Bank Crisis while non-subscribers should see Is Another Banking Crisis Inevitable? as well as The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance.
Here's how to play it via options -Game Over For The European Ponzi Scheme?

This Time Around, the Fed Will Be Powerless

Phoenix Capital Research's picture

Bernanke and pals never really understood what caused the 2008 Crisis. True, the fundamental reason for the Crisis (the unregulated derivatives markets) was obvious and the Fed knew all about it (Greenspan said that the derivatives market could “implode” the system as far back as 1999).

However, the derivatives market was really about one thing only: trust.

Every business transaction is based on trust in one form or another. If you don’t trust the folks who work for you or vice-versa, your company is doomed. The same goes for financial transactions, business partners, anything involving business.

The reason 2008 happened was because the large Wall Street banks, who had turned the entire world economy into a securities playground via the derivatives market, suddenly stopped trusting each other to accurately assess the risk/ asset value of their balance sheets.

In simple terms, Bank A, who was lying about its derivatives exposure, suddenly realized that all the other banks it did business with were likely lying as well. So Bank A stopped trusting the other banks, interbank lending dried up, and the system collapsed.

Bernanke never understood this. The reason is that he never worked in business. He’s a academic. Authority figures in academia, especially in hocus pocus fields like economics, don’t need trust to do anything. If they say you’re a D student, you end up a D student. End of story.

So when 2008 hit, Bernanke thought what any academic authority figure would think of the situation: that he could fix everything simply by virtue of his authority (the Fed backing up the system).

It worked temporarily because the Fed is considered THE monetary authority for the world financial system. Wall Street, given the chance to unload debt onto the public’s balance sheet and get free money from the Fed, was only too happy to go for the scheme (the alternative was collapse).

But these guys never really started to trust each other again. They knew the deal: that they are their banking buddies were all bankrupt. Why do you think they quickly increased compensation back to record levels? Because they thought the game would last?

After all, they sure as heck didn’t stop the derivatives game. They didn’t actually do much of anything to improve their businesses. They just played the Fed’s game for all it was worth and paid out as much of the free money to themselves as they could.

Which brings us to today. Nothing from 2008 has actually been fixed. Faith and trust do not exist in the financial system anymore. Everyone knows the deal… they just don’t want to admit it as it means GAME OVER for the system as we know it.

Which is why now that the next round of the Financial Crisis has hit, there’s really nothing the Fed or anyone can do about it. They had their big chance to fix things in 2008 and failed. This time around, no one will believe the Fed can fix anything. And what’s coming will make 2008 look like a joke.

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