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Jim Rickards on the latest Federal Reserve Rate Decision and Operation Twist 2.0

For a lucid view of the recent Fed action in global context watch this:

Jim Rickards on the latest Federal Reserve Rate Decision and Operation Twist 2.0

It's a bit long, but worthwhile. Of particular interest at the back end are his comments on structural rent seeking and the costs it creates for our economy. Rent seeking translates into the political form of your risk, my return.   Moral hazard, the kudzu of our current regulatory framework, is the fountain of rent seeking, and it's everywhere ... 

  • Too Big To Fail whereby the entire loan & swap books of the TBTF institutions are underwritten by the US taxpayer
  • the failure to reform money market funds and the repo market and  the consequent expectation of federal support for funds which have no independent capital or collateral to support trillions of dollars of credit,  counter party & clearing risks
  • Fannie & Freddie which were essentially untouched by Dodd Frank and comprise about 95% of the entire US mortgage market and
  • pick a sector: health carer, automotive, education, pensions, energy etc.

We missed a lot, but you get the picture. We continue to manufacture boatloads of systemic risk by moral hazard. It is not a cost or risk free proposition.  And our politicians monetize for their own benefit their ability to allocate the privilege. No one seems to address the loss of freedom which accompanies the growth of moral hazard, but it is very real.

Lastly, an excerpt from an article on the SEC & money markets in today's WSJ:

Money market mutual funds have been rescued from financial trouble by their parent companies more than 300 times since the 1970s, about 100 more than previously reported, according to a new Securities and Exchange Commission study.

The study, which isn't being released to the public, appears to bolster SEC Chairman Mary Schapiro's contention that the $2.6 trillion industry needs stronger regulation

Wait a minute: "The study... isn't being released to the public"? One might reasonably ask, why not?  How are citizens to make informed decisions about what might be one of the most important regulatory & structural issues of the decade when key information is withheld? 

And if you're considering your freedom you might want to ponder the answer implicitly proffered: you don't need to know... if we wanted your opinion, we would ask.



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