Whistling Past the Graveyard
Ordinary people face protracted Depression conditions.
by Stephen Lendman
Europe's sinking. Japan's in recession. China risks landing hard. America's sure to follow. Yet equity markets rallied impressively so far in January.
Be careful. Economist David Rosenberg warns about renting, not owning, rallies based on hope. They're sure to disappoint, especially ones fueled by speculative excess.
In his book titled, "Manias, Panics and Crashes: A History of Financial Crises," Charles Kindleberg wrote:
"The moral hazard problem is that policy measures undertaken to provide stability to the system may encourage speculation by those who seek exceptionally high returns and who have become somewhat convinced that there is a strong likelihood that government measures will be adopted to prevent the economy from imploding - and so their losses on the downside will be limited."- Advertisement -
In the 1990s, it was called "the Greenspan put."
"The moral hazard problem is a strong argument for nonintervention as a financial crisis develops, to reduce the likelihood and severity of crises in the future. Will the policymakers be able to devise approaches that penalize individual speculators while minimizing the adverse impacts of their imprudent behavior on the other 99% of the country?"