Saturday, November 03, 2012


"Politicians, central bankers and governments are trapped in “do whatever it takes” late-cycle reflationary measures. You can bet on it. Many have. And the global Credit Bubble dynamic will ensure that the world remains short-sided and blind to myriad serious risks until it’s too late.

We’re today in the midst of the manic financial Bubble phase. Especially here in the U.S., the markets will finance virtually anything. There’s hardly a junk bond the market doesn’t love. CDOs are back. Relatively higher-yielding municipal debt induces salivation. There are, then, no worries regarding the ability to finance Sandy recovery and rebuilding efforts. Costs really don’t matter. 
Wealth destruction is basically irrelevant. If it’s “money” that’s needed, well, we’ve got the Bernanke Fed. And why not just rebuild on the water’s edge and buy cheap federal flood insurance. “Broken windows,” broken subways, broken transformers, broken communication hubs, and broken neighborhoods are sure to incite a borrowing and spending boom. Dr. Bernanke’s “mopping up” strategy in action."

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