Tuesday, February 21, 2012

Read it and weep

Market analyst, Bob Janjuah, smells epic fail. A sample (including the best one-sentence summary of our financial crisis that I've seen; emphasis mine):
The crisis was caused by central bankers mispricing the cost of capital, which forced a misallocation of capital, driven by debt/leverage, which was ultimately exposed as a hideous asset bubble which then collapsed, destroying the lives and livelihoods of tens of millions of relatively innocent people. Well now, if you listen to the latest from Bernanke and Draghi, it seems that the only solution they can offer up is to yet again misprice the cost of capital, in the hope that, yet again, through increased leverage/debt, we are yet again "greedy" enough to misallocate capital, which in turn will lead to yet another round of asset bubbles. Such asset bubbles are meant to delude us into believing that we are now "richer". When – as they do by definition – these bubbles burst, those who have been suckered in will realise that their "wealth" is instead an illusion, which in turn will be replaced by default risk.

1 comment:

Anonymous said...

Just to pile one piece of good news on top of another, you may wish to take a look at this article by John Cochrane of the University of Chicago about the Federal Reserve, bank regulation, and mortgage modification:

http://johnhcochrane.blogspot.com/2012/02/fed-independence-2025.html