Stop trying to rescue the financial system

As mentioned in an earlier post, Nassim Taleb’s excellent article The Black Swan of Cairo offers important insight on why repeated efforts to intervene and prop up asset markets only makes our financial system more volatile, dangerous and prone to increasingly severe crisis.  It’s kind of like repeatedly acting to save our kids from all their bad decisions and consequences–they never learn good lessons and habits and eventually are likely to end up in a complete disaster.

We have seen this all over and most recently in Europe where central bank efforts to underwrite insolvent governments, their debts and banks have bought only fleeting respite to be followed by violently surging interest rates. This chart of the US 10 year treasury yield underlines a similar point where repeated QE efforts from the Fed, ostensibly to bring down borrowing costs, have in fact resulted in the opposite effect bringing a break out to higher yields each time. We the people must get the talking stick back off of bankers and bought politicians if we are to make any sustainable progress out of the current crisis.

Click here for a larger version of the chart. Source Cory Venable, CMT, Venable Park Investment Counsel Inc.

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6 Responses to Stop trying to rescue the financial system

  1. dazzo says:

    Let’s Make The Clawback Risk REAL

  2. michael says:

    Jawboning will not work to correct the corruption. Once the mainstream finally get the message, through the austerity measures which are sure to come, there may be some hope for a common rebellion against the Fascist Regime.
    Maybe you could lead a passive non participatory revolution. No marches. No violent outbreaks. Just stop participating. Don’t drive. Don’t fly. Don’t go to work. Don’t spend. Just take a week and stay home. A strike of sorts, it works for the unions. If every one in the world did this for just one week think of the message that would be sent. Won’t happen of course, to simple and it might even work. People are programed to follow and continually fool themselves by believing that some bobble head like the Big O will come along and somehow save them. Change will not come from the top. Anyone who wastes time thinking it will are not thinking.

  3. JW says:

    Yes, in total agreement. Unfortunately, by using IMF, Euro version’s QE is at our door step with thanks to the influential support of US Treasury Secretary. As many people are expecting, US QE3 will follow soon. Just in time for the US 2012 Presidential Election. For us, I hope I am wrong.

    BTW, Bradly indicator is showing another major shift (?) on December 28, 2011. Again, many thanks for the chart. My 2 cents. JW, Vancouver

  4. dave says:

    their argument will be look at the far right of the chart we now have lower borrowing costs before qe 1 and QE 2.. the increases in borrowing cost were only short term spikes

  5. Ron Sinclair says:

    Thanks for the recommendation on the Nassim Taleb article Danielle. A terrific read and opened my eyes to a number of issues in addition to investing and finance.
    One could also think that the issue of trying to control the complex climate through focusing on a single issue – CO2 generation – is also destined to fail, since there is away more than one issue involved. Food for thought.

  6. DabblerJim says:

    Excellent summary, Michael. Your words about people being “programmed to follow and continually fool themselves by believing that some bobble head like the Big O will come along and somehow save them. Change will not come from the top…” struck a particularly vibrant cord from my morning’s reading of the concluding chapter of Andrew Bacevich’s excellent book “The Limits of Power”; here’s just a partial quote: “Paradoxically, the belief that all (or even much) will be well, if only the right person assumes the reins as president and commander in chief, serves to underwrite the status quo. Counting on the next president to fix whatever is broken promotes expectations of easy, no-cost cures, permitting ordinary citizens to absolve themselves of responsibility for the nation’s predicament.” [Bacevich’s entire book is devoted to laying out in the most articulate manner how a big sham is being perpetrated upon the American people, magnified greatly beginning with the Truman era.

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