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Tomasz,
Philosophically I agree with you 100%. The moral hazard issue has
been (i.e. Greenspan-put), and continues to be (i.e. Bernanke's
helicopter) a long-term threat. I have a lot of sympathy with Ayn
Rand, and all that.
But there are also the constitutional issues. The Fed has 2
responsibilities, namely price stability and protecting growth
(i.e. "full" employment). In other words, if the Board concludes that
the probability of a recession has increased significantly (like
yourself probably if you're bearish), they have to act. It is their
duty, regardless whether they take their cue from (lagging) macro
economic data, their (failing) models, (overreacting) markets, or tea
leaves.
Re his image flying in his helicopter, remember that his speech in
2002 (when we were all worrying about deflation) was very important
for confidence, and according to some the first trigger for the
subsequent recovery. I'm not defending the man, nor his predecessor.
I'm just stating the roles they need to play.
You could be worse off. We have a Governor (of the BOE) who couldn't
prevent a bank run (e.g. Northern Rock), and simply ignores recession
signs. Add to that a former Chancellor (Brown) whose public finance
policies are falling apart, consumers who are even more overleveraged
than their US counterparts, housing prices which are stratospheric,
and you have a recipe for disaster. But then again you could be
blessed by having Trichet . . .
Finally, the growing influence of capital markets on the real economy
(i.e. the tail wagging the dog), now increasingly at a global scale,
is the crucial issue here. Capital markets, and the products that are
designed (e.g. securitisation or the "shadow banking system" [ever
wondered why CB-policies seem to have less of an effect?]) and traded
are all driven by this paradigm called "modern finance". It is this
theory (which, like most, I've been brought up with) which causes the
longer-term structural problems that remain. But that's a different
discussion.
PS
--- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@xxx>
wrote:
>
> Hello,
>
> You may have some valid points here but
> 10% for me at least is not really anything worth panicing
> plus making people belive that central bank will always step in and
> bail out the market in case of any 5% down move
> makes people just more reckless in their decisions and this in turn
> may create new (old?) problems in long term.
>
> Best regards,
> Tomasz Janeczko
> amibroker.com
> ----- Original Message -----
> From: "Yuki Taga" <yukitaga@xxx>
> To: "Tomasz Janeczko" <amibroker@xxxxxxxxxxxxxxx>
> Sent: Wednesday, January 23, 2008 2:00 AM
> Subject: Re: [amibroker] Helicopter Ben :-)
>
>
> > Hi Tomasz,
> >
> > Yes, when world equity markets drop ~10 percent in 2 days in
concert,
> > you are talking 10s, maybe 100s of trillions of dollars. Yes, a
lot
> > of that is just 1s and 0s stored on computers, but if you don't
agree
> > that its presence, or its sudden disappearance, influences human
> > behavior to a tremendous extent, then I don't know what I could
> > possibly say to convince you otherwise. The markets certainly
> > believe that all those 1s and 0s that have recently disappeared
from
> > major money center banks have some real consequences.
> >
> > You know I'm hardly going to argue against the cyclical nature of
> > markets. I have long made a nice living off of them. But sudden,
> > violent contractions in wealth have real consequences. The Fed
knows
> > there is little they can ultimately do about the market's course,
but
> > they are going to try and turn a waterfall into at least a
cascade,
> > or a rapids. That's probably a good idea, too.
> >
> > At times like yesterday, anything that gets people thinking, even
a
> > little bit, instead of reacting in blind panic, is probably a good
> > idea. Markets are acting like a deep and long recession is already
> > baked into the cake. Maybe, but not necessarily. Tossing a
monkey
> > wrench into the wheels of the panic bus in order to maybe slow it
> > down a little is probably not a bad idea.
> >
> > Also, as I'm sure you know, but as your words seem to obfuscate,
> > lowering interest rates is not exactly the same thing as printing
> > money.
> >
> > And I think it is competition, not recessions, that do the real
heavy
> > lifting of improving efficiency.
> >
> > Yuki
> >
> > Wednesday, January 23, 2008, 8:42:07 AM, you wrote:
> >
> > TJ> Hello,
> >
> > TJ> Trillions of dollars ? Or rather "paper profit" (the numbers
stored in computers)?
> > TJ> The entire nature is cyclical. Autumn and winter comes after
summer, what's wrong with that?
> >
> > TJ> Recession follows the period of growth. And it forces
companies to seek
> > TJ> more efficiency and makes them more competitive. That's
healthy for the economy.
> > TJ> Fed printing money does not make you wealthier, you will just
see more zeros in numbers
> > TJ> on your computer screen but this means nothing. What's the
difference if someone
> > TJ> is losing wealth by market fall or by money devaluation? Only
the one who has the printer
> > TJ> benefits from that.
> >
> > TJ> Best regards,
> > TJ> Tomasz Janeczko
> > TJ> amibroker.com
> > TJ> ----- Original Message -----
> > TJ> From: "Yuki Taga" <yukitaga@xxx>
> > TJ> To: "Dennis Brown" <amibroker@xxxxxxxxxxxxxxx>
> > TJ> Sent: Tuesday, January 22, 2008 11:34 PM
> > TJ> Subject: Re: [amibroker] Helicopter Ben :-)
> >
> >
> >>> Hi Dennis,
> >>>
> >>> Think about what you said compared to the reality of the
situation.
> >>> Nearly unregulated free-market capitalism (as in CDOs, SIVs, et
al)
> >>> just about brought down the house.
> >>>
> >>> It's a funny cognitive dissonance. Ultra-right religious
> >>> conservatives (not saying you are one), who are often also pure
> >>> laissez faire market people (ditto), accept the negatives of
human
> >>> nature as inevitable when it comes to moral issues. But
somehow,
> >>> this same negative human nature is presumed, one would
apparently
> >>> suppose, to just vanish once human beings step forth into the
holy
> >>> cathedral of completely unregulated capitalism. "Let the
markets run
> >>> themselves completely," they say. But every time they get
their way,
> >>> they or the markets just about run the truck into a ditch.
> >>>
> >>> There. If you start a thread with serious potential for
*conflict*,
> >>> Dennis, load the wagons! ^_-
> >>>
> >>> Yuki
> >>>
> >>> P.S. Given the non-zero sum nature of equity markets, and their
> >>> size, it's probably not a bad idea to do something in an
attempt to
> >>> stop potentially trillions upon trillions of dollars from simply
> >>> being panicked out of existence. Money is simply uncreated, to
use a
> >>> rather ugly phrase, for the most part. That was allowed to
happen in
> >>> the early 1930s, with pretty sad consequences.
> >>>
> >>> Wednesday, January 23, 2008, 12:38:32 AM, you wrote:
> >>>
> >>> DB> Hello Tomasz,
> >>>
> >>> DB> There are many of us in this country (USA) that want to see
the
> >>> DB> markets take care of themselves. Unfortunately not enough
are aware
> >>> DB> of the issues involved and there is only one person running
for
> >>> DB> President that has that goal --Ron Paul.
> >>>
> >>> DB> It may take a complete financial disaster before everyone
wakes up
> >>> DB> and realizes that centralized control does not work well.
No small
> >>> DB> committee can understand all the factors involved in an
economy. If
> >>> DB> they could, then it follows that a small number of people
(or an
> >>> DB> individual) could know enough to make a quick fortune in
fundamental
> >>> DB> investing. And we know how hard that is to achieve!
> >>>
> >>> DB> Best regards,
> >>> DB> Dennis
> >>>
> >>> DB> On Jan 22, 2008, at 10:23 AM, Tomasz Janeczko wrote:
> >>>
> >>>>> Hello,
> >>>>>
> >>>>> So helicopter Ben is in full panic mode now :-)
> >>>>>
> >>>>> It is pretty amazing and funny to see how this "free economy"
is
> >>>>> hand-operated :-)
> >>>>>
> >>>>> Best regards,
> >>>>> Tomasz Janeczko
> >>>>> amibroker.com
> >>>>>
> >>>>>
> >>>>>
> >>>>> Please note that this group is for discussion between users
only.
> >>>>>
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to
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> >>>>>
> >>>>> For other support material please check also:
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> >>>>> Yahoo! Groups Links
> >>>
> >>>
> >>>
> >>>
> >>> Please note that this group is for discussion between users
only.
> >>>
> >>> To get support from AmiBroker please send an e-mail directly to
> >>> SUPPORT {at} amibroker.com
> >>>
> >>> For NEW RELEASE ANNOUNCEMENTS and other news always check
DEVLOG:
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> >>>
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> >
> >
> >
> >
> > Please note that this group is for discussion between users only.
> >
> > To get support from AmiBroker please send an e-mail directly to
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> >
> > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
> > http://www.amibroker.com/devlog/
> >
> > For other support material please check also:
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> >
> > Yahoo! Groups Links
> >
> >
> >
>
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