In response to an FT article by Martin Wolf on 4th July 2017, entitled ‘Risks remain amid the global recovery’
“We in the high-income countries allowed the financial system to destabilise our economies. We then refused to use fiscal and monetary stimulus strongly enough to emerge swiftly from the post-crisis economic malaise”
Allowed? Where’s the allowed part? We did it out of ignorance and hubris. And until the idiots running the economy fess up to what they did – we’ll do it all over again.
Firstly: The US Treasury, at the behest of President Clinton, under Goldman Sachs bagman Robert Rubin and his Teflon coated side-kick Larry Summers set about the deliberate financialisation of the economy by:
1. Providing mortgages to anyone that could fog a mirror
2. Unleashing moral hazard from the cage of Glass Steagal, and
3. Deregulating the derivatives market, despite warnings from Brooksley Born…who was subsequently humiliated in Congress by a typical display of hubris from the aforementioned Larry Summers…a man so clued up on financial markets that he lost hundreds of millions of dollars for Harvard...and still isn’t driving a taxi…the latest I looked he was still writing for this paper in a triumph of address book over talent
Secondly: The Federal Reserve, whom you declare didn’t respond strongly enough to emerge from the crisis, in reality provided monetary cover for the illiterate structural changes listed above:
a) Firstly through the use of the Greenspan Put - a bubble blowing machine designed by a guy who used to understand markets before he cashed in his integrity to sit at the big boys table
b) Secondly through the repeat performance put on after the crisis by the so-called expert on the great depression Ben Bernanke – a guy who didn’t get it then and doesn’t get it now. His cut and paste job from Milton Friedman should have got him a PhD in Microsoft Office rather than economics
c) The latest pigs-ear policies from Dr Yellen, who having missed a whole cycle is tightening into weakness. She's doing that so she has room to cut again when the next recession arrives, which will be sooner than she thinks - everything arrives sooner than Dr Yellen thinks except wage inflation and the conclusion to one of her sentences.
In the meantime the pensions crisis that these geniuses have been cooking has finally reached the stage where even politicians can't ignore it - Illinois has just raised taxes by 32% - Texas and Florida will soon be welcoming a new wave of tax exiles. Of course none of this will show up on Dr Yellen's models, which measure a Legoland world that doesn't exist.
Never mind the rubbish about sustained recovery – look at the curve known as the ‘credit pulse’ – you will see that the growth in debt – for debt is what it is – is turning negative. And in a debt based monetary system that is not time for champagne…it will however, soon be time for excuses…for excuses are the only truly creative thing that the above group of clueless numpties are any good at creating.