I heard at the time and continue to hear, even in the better financial journals, that TARP was unprecedented and it strikes me as to just how ignorant what passes for sophisticated financial journalism is. The banking crisis that Tiberious stemmed is a meticulously documented threat to the lynchpin Empire of the era (sound analagous?) yet it is rarely mentioned. There are others as well but 33 AD is probably the most illustrative. We simply do not have a Bagehot to remind us of Ecclesiastes: "... there is nothing new under the sun." Ther difference between Rome's Empire in 33 AD and the American Empire in 2008 is that what happened in Rome was truly a Black Swan event (or series of events that hit together) in the context of a reasonably well managed Empire. What smacked us was totally predictable (even its timing was anticipated by more than a few better minds) and in no way a "Black Swan". My own cousin -- a very bright, successful, hardworking guy but not a genuis -- extracted himself in 2007 from a subprime mortgage partnership with a premier financial institution at a seven figure cost and resigned from the board of another prestigious financial institution at the same time. At that time he told me that subprime had deginerated into "making loans to people who did not have the capacity to pay the money back" and finished the thought by saying "that's a bad business model and I want nothing to do with it." Rome bounced back to her former roboust health because the crisis was an anamoly. Our 2008/9 crisis was the farthest thing from an anamoly. Our contiuing weakness is the result of a tremor revealing a serious fault that is yet to play out. Paulson and Bernanke did what they could to stabilize the very ill and probably dying patient wheras Tiberious provided oxygen and basic care to a society in robust health suffering from a trumatic incident. I make no claim that the patient will die this year or next or that the patient won't rally a time or two but I do believe that his approaching death will be obvious to every halfway observant man or woman within three to five years. We are in early innings but when the scoreboard reads 11 to 2 against, in any inning, the odds are enormous that the game is already lost. And, given the game is, to a large degree, an expectations game ... the tipping point is akin to the outcome. To be continued.
Does the reason matter? If Bane had broken into the NYSE and conducted a bunch of transactions on AIG's and Lehman's accounts that caused them go bankrupt would that have changed things? In early 2007 as the crisis was unfolding a few people I know on sellside mortgage businesses were saying the same thing as your cousin. I think many of the smarter people in that asset class started to see the writing on the wall.
The distinction I made (or at least was trying to make) was not at all about the reason; rather it was all about the context. If the underpinnings of the financial system were solid, a fraud, even one of the maginitude you speak of, can be handled by a bailout that probably leads to a reasonable and expeditious recovery. Leaving aside that fraudulent third party trades would be quickly reversed by the NYSE (so the reason, in that case, might well matter) societies that are well lead and that have solid financial foundations can generally be "goosed" back onto the virtous path that they were on prior to the crisis. Societies that are as f**ked up as Hogan's goat are also goosed back onto there prior path by the medicine. The problem being that the latter were and are on the ROAD TO HELL! I believe the path has pretty good signage even now and I think the signage gets better and better as we go down the path.
Makes sense. The reason isn't the issue, but the context. Of the same had happend in Rome but the empire didnt have the fiscal strength it would be more comparable to our situation.
lol ... I don't get to get change history so I need to work with the "TARPLIKE" events that I know of. They key is there are few voices in our media that have any sense of it at all. I can see you are quite the critic. Try throwing a bit of substance into the conversation; you might enjoy it!
I wasn't being critical of your comments. I enjoy all the posts you write. I thought it was an interesting article. I viewed it differently than you did. I read from it that Rome had a sophisticated economy. Financial panics have happend for a long time (you don't normally read about them before 1600ish). I am not as bearish on the America as most people on this board are. There are issues. QE isn't not one of them. What does bother me is that we are culture of materialism. The Chinese, Indians, etc. are investing in infrastructure and production while most of us spend our time watching reality television of people taking advantage of other people for financial gain.
My apologies. I'm not all that concerned with QE on its own just that it has become the long term life support that is needed. It is the fact that it is needed that concerns me. Healthy economies in crisis sometimes need the shot of adrenaline but little more after the first year. The Chinese are certainly investing in infrastructure but the Indians I know are petrified by the fact that their infrastructure investments are so laden with corruption -- I'm told it is unimaginably corrupt -- that money gets pushed in one side of the machine and the value of what is pushed out of the other side is so overpriced that it can't continue. It's amazing what the Indians can produce in spite of their infrastructure ... not because of it. I recall a year or so back your comments on Newedge were helpful to me. Maybe at some point I'll be trading in enough size where theywill make sense for me; or, more accurately, my account will make sense for them ... lol. An impressive firm.