Listening to CNBC Forever Blowing Bubbles

 

I do hearken back to when the market hit the recent highs while signs of looming recession and a bubble about to burst were all around us. The cheerleading brigade on CNBC hailed this as the great bull market of the new century. But like most bubble markets the bull left behind a lot of reeking deposits for the taxpayer to clean up.

 

Of course now everyone in the country is watching their retirement plan shrink and their savings disappear. Meanwhile these same folks at CNBC are firmly of the opinion that government remains the problem. Any action taken by government to stop the ridiculous redistribution of wealth by banks that have failed and brokerage firms that are still destroying wealth is bad.

 

The redistribution of wealth into the hands of the Financial Intermediaries is sapping our national strength when we can least afford it. The lack of common sense rules about how much money can be distributed to the failed financiers running these companies in the short term is in part a product of these pundits’ loud voices.

 

Unfortunately no one in Washington has the courage of their convictions related to the need for responsible controls for our financial system. This is why we have reeled from bubble to bubble since the 1980’s. Each time we reduced regulatory oversight of the Financial Intermediary Companies the salaries and bonuses went up and the new bubble got larger.

 

The Real Estate bubble was humongous. Possibly, it was the largest in the history of modern economics. If we do not fix what is wrong with this system of wealth management the next one will be worse. Oh yes as long as there are incentives for short-term success that are not cancelled by long-term failure intermediaries will lend money without properly assessing risk.

 

Creating financial instruments which theoretically hedge against losses do not protect investors based on what happened this time out. They do create whole new classes of Financial Paper that can be traded to generate income only for the intermediary class. Our economy is producing around sixty trillion dollars per year worldwide. Does it make any sense that we are trading between six hundred trillion and one quadrillion dollars a year in financial paper?

 

Every trade carries a cost of intermediary salaries that is substantially higher than the historic norm. The result is to cheat the owners of the wealth and transfer much of it into the grasping hands of the people running those intermediary companies. It would be nice to hear some real reporting about the real scandal. Something relevant to the problem would be nice. What the reporter’s thoughts are about government intrusions into the market has ceased to be interesting.