I just love it when Federal Reserve guys worry about “bubbles.” Where does the ‘soap’ that produces bubbles come from? Why, from the Federal Reserve, of course. They provide the “liquidity” for the big banks to make massive bets in the financial markets with virtually free money (conjured out of nothing, of course… that’s what the Fed produces).
Most of our “growth” over the past decade is a total illusion–we aren’t producing much of anything anymore, and make much of our “income” based on nothing more than financial games that are basically casino bets.
I reserved comment when this news first came out, but a couple of thoughts on the Fed’s recent “stress test” results:
From the New York Time’s Dealbook blog,
In its report, the Fed noted that Citigroup had failed to sufficiently correct deficiencies that the regulator had flagged to the bank previously. And it was the only one of the nation’s five top banks that failed to persuade the Fed to bless its capital plan. Upon passing their tests, Citigroup’s rivals JPMorgan Chase and Bank of America swiftly announced plans to increase dividends and buy back shares.
1 – Citi is one of those banks that should have gone belly-up in the last crisis–no bank should ever be bailed out. There are legal procedures in place for winding down a company that should die, and allowing better management to pick up the pieces and move forward.
2 – The fact *anyone* failed these tests should send shudders up a sane person’s financial spine. This is like taking a quiz your teacher told you was coming–and which was going to be so simple anyone with an IQ over 50 would pass. Failure reveals the dire financial straits many of these mega-banks have put themselves into.
In conclusion, these ‘tests’ were designed as PR vehicles, by the Fed, to falsely assure people “everything is OK” with the big banks. The fact any of them failed tells you just how close we are to another disaster.
Make no mistake: Even those who passed are inescapably tied into those who failed through myriad financial derivative contracts. The “financialization” of the American economy has temporarily benefited bankers and politicians, but puts the Western world on the edge of a cliff. Are you strapped in?
P.S. This is also why war in Europe is much more likely. The leadership of the United States and Europe need a “convenient excuse” for the collapse that is coming–much better to be able to blame Russia for the problem than to have the public look at our own business and political leadership as the culprits.
Thankfully, for our elites, the education system has ensured that only a very few will have eyes on those who are truly responsible.