- Aleph Blog: Queasing Over Quantitative Easing Part V
"Does it matter who controls the businesses of the country? Does it matter who regulates the businesses of the economy? Should these people be smart or dumb?
One cost of the meddling that the Fed and Treasury have done through the bailouts is that dumb people are left in place. People who mismanaged their firms still manage them, and regulators that misregulated are still in their jobs. Both are rescued by taxpayer largess, but it reveals another hidden cost of bailouts — they make us less competitive/effective as a nation, because we do not let firms fail, and we don’t fire regulators that were negligent, including the Fed.
The optimal outcome would be for bright managers to buy failed firms out of bankruptcy, and for failed regulators to be replaced with new ones that have a chance of doing things differently. Aside from that, if you never fire regulators for failure, you will never motivate them to do what is right.
And this is true of most meddling by the Fed or the Treasury, picking favorites, not letting bad firms or regulators fail. This extends to QE. If you need lower rates in order to survive, you probably don’t deserve to. All a lower rate structure does, if the government or Fed is forcing it, is encourage investment in lower yielding investments, because they can be financed cheaply for now. This is an aspect of the liquidity trap, and the Fed is deepening it with their policies."
-Calculated Risk: Greece: Default Probabilities Before and After Policy Response
Extend and pretend anyone? We've talked about this concept ample times already here: Greece solved nothing - they just delayed the day of reckoning for their problems.
-Barry Ritholtz: "Dick Fuld's Fantastic Revisionism"
"There are two issues here: The first is “why did Lehman collapse?” The second is “Why didn’t the Fed rescue them?”"
- Jeff Matthews with more on "Executing Strategies"
-Nemo with an interesting post on expectations; specifically, inflation swaps. He even indulged my curiosity in the comments (still ongoing as I publish this piece)
- The legendary Dr. Pauly guest-blogging for AlCantHang at the FullTiltPoker blog:
"What the hell is a “durrrr” anyway?
My gut told me the word was made up, but a part of me thought that maybe durrrr had origins in dead languages like Latin or Mayan, or perhaps it was the scientific name for a breed of howler monkey. After a thorough internet search, I discovered… nothing. Indeed, durrrr is a word wholly concocted by Tom Dwan. In an interview, he once mentioned that he made up the “durrrr” moniker in an attempt to annoy the hell out of his opponents. He was spot on, because nothing can tilt you more than knowing that you’re losing a few buy-ins to a guy named durrrr, a word that when said aloud resembles the sounds that an incontinent person makes before they defecate themselves."