“One of the best tidbits of advice I received as a young buck was to put yourself in the shoes of the person on the other side of your trade. See what they see. Think what they think. Keep your friends close and your counter-party closer! “
“Hank Paulson and Ben Bernanke have a clear mandate. They’re willing to mortgage our future with hopes that a legitimate economic recovery takes root. We’ve seen this movie before (on the back of the tech bubble) but memories are short given our immediate gratification societal mindset. They’ve got deep pockets. Interest rate cuts, Auction Facilities, discount windows, shifting collateral parameters, Working Groups on Financial Markets, interest on bank reserves, rebate checks, open-market operations and repurchase agreements are all at their disposal.
And if those don’t work, they seem intent on inventing intervention that does. We’ve written extensively about financial engineering and the inherent dangers thereof. The Federal Reserve balance sheet continues to drain as they attempt to fund the banking system. There are only so many bullets left in the gun and the last one will likely be pointed inward.
Still, we must respect the claws of a cornered animal. We’ve passed the point of no return and the government will do everything within (and potentially beyond) its powers to ensure the finance-based global balls remain in the air. You don’t have to agree with it, you simply have to respect it.”
I read this article Wednesday, and it has stuck with me like a pebble in my shoe.
I work for the federal government. As a physicist, I try not to get involved in politics, but on occasion, I do end up substituting for my boss in some very interesting meeting. The dynamics of how the federal bureaucrats think is reflected in the article.
Anyone who thinks that the federal government is intent on doing the right thing, needs a reality enema. Generally the front line people try to do the right thing, but once you pass the first line supervisors, it is just about power and ego. It is all about getting power, defending your power and the public be damned.
Hank and Ben have been given their orders, and if anyone things they are going to have a twinge of regret, or a last minute epiphany, you have not talked to very many bureaucrats.
