Juggling Dynamite

Nomi Prins, author of “Collusion: How Central Bankers Rigged the World,” discusses how easy monetary policy has affected the global economy.  Here is a direct video link.

There could be a crash bigger than the 2008 crisis, author says from CNBC.

David Rosenberg’s recent corporate debt to GDP cycle chart goes well with this discussion, shown here since 1986.

Important article from Better Markets this week, see:  With Red Lights Flashing Danger, Where Are the Adults in Finance?

“It seems almost everyone in finance is cheering on the deregulation frenzy in Washington and the demise of consumer protection and enforcement in the financial markets.  Given that an historic crash happened just ten years ago and the too-frequent predatory conduct in the industry still hasn’t abated, this is an irresponsible, knowing dereliction of duty by bankers and public officials who know better.

Rules and enforcement not only protect consumers, investors and taxpayers, but also financial markets and the financial industry itself.  They not only prevent catastrophic financial crashes, but also direct financial activities toward the real economy while nurturing and maintaining investor and public confidence in our markets.  That trust is the foundation upon which our markets are built and work, becoming the envy of the world.

While rules and enforcement are essential in normal times, they take on heightened importance now when we are nine years in to the boom phase of the business cycle; when leverage is breaking records while interest rates are rising; when the punch bowl was just spiked with $2 trillion in stimulus; and, when the unprecedented Fed actions over the last ten years are going to be unwound by equally unprecedented actions.

Making matters worse, enforcement of the rules has dropped precipitously, which is equally bad news for everyone…”

We have learned the error of these ways, the hard way, repeatedly through time.  As former Morgan Stanley’s CEO, John Mack, admitted after the 2008 crash:

“[w]e cannot control ourselves. You [lawmakers and regulators] have to step in and control the Street.”

Incentives that goose short term profits at the expense of longer term viability are misguided and counter-productive.  Policy changes are needed to shift the focus from short term financial gimmicks to longer term investment and innovation.

Oliver Hart is a professor of economics at Harvard University. Hart won the Nobel Prize in economics in 2016 for his work in contract theory and is the author of “Firms, Contracts, and Financial Structure.” Hart sat down with Business Insider’s Sara Silverstein at UBS’s Nobel Perspectives Live event in Brooklyn. In this interview, Hart discusses his most recent paper “Companies Should Maximize Shareholder Welfare Not Market Value.” He says that profit maximization is important to shareholders, but it’s not the only thing they care about.  Here is a direct video link.