The View From 1776

The Origin Of Economic Bubbles

As noted repeatedly on this website, speculative bubbles develop when the Federal Reserve system floods the financial markets with excessive amounts of cheap, fiat money.

Posted by .(JavaScript must be enabled to view this email address) on 03/30 at 08:31 PM
  1. The last financial crisis can be directly tied to Wall Street's uncontrolled and unregulated casino gambling with other people's money. Credit default swaps and other supposedly risk-spreading devices were merely thinly papered over ways to place the big bets, with 100 to 1 odds, using imaginary capital.
    Posted by .(JavaScript must be enabled to view this email address)  on  03/31  at  10:45 AM
  2. Jay is right as far as he goes--but the wall street gambling only happened because the federal government for some idiotic reason was guaranteeing every bad mortgage the wall street crowd wrote.

    The wall street speculators were just taking the federal government's hand-outs, just as many of the disability and welfare abusers are simply taking advantage of federal hand-outs. Who can blame them? If our fearless leaders say it's OK who are we to object?

    When a government tempts people with easy hand-outs, and then rewards the people who weaken with more hand-outs and bailouts, there is no end to the demand for more handouts. The demagogues corrupt the people as they bankrupt the country.

    And when the federal reserve floods the money supply, speculation and inflation will follow, and the bubble the FRB creates will eventually burst. And, if it doesn't, the FRB will jack the interest rates up until it does. The Feds clumsy interventions thus merely exacerbate normal business cycles.

    Perhaps (duh!) we would be better off if the feds stopped jiggling the money supply and interest rates and stopped guaranteeing bad behavior and risky debt. Instead they could concentrate on the traditional rules requiring banks and brokers to maintain prudent balance sheet standards.
    Posted by bill greene  on  04/02  at  07:40 PM
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