In Rome The Senate Parties While The Empire Crumbles
I like to visualize the pool of economic liquidity like a kitchen sink, with its source as the drain. As the drain is pulled water recedes from anything and everything in the sink. The last to experience the withdrawal of liquidity is the drain. Until all of the liquidity is withdrawn, the drain believes everything is a-okay. Even though the dishes, the sink walls and everything in the sink realized long ago there was no remaining liquidity.
As the pool of liquidity recedes in the economy, its source will be the last to feel the effects and understand its ramifications. That means both Washington and its partner lobbyists from Wall Street and big business feeding at the trough of gluttony have yet to receive their wake up call. I can assure you the tsunami is on its way to Washington and Wall Street.
Do you hear that loud sucking sound yet? If so, we are close to the drain. Politicians, central bankers, most economists and Wall Street think the worst is behind us. They think this was just a liquidity crisis. So, their solution was to re-liquify markets. All is again wonderful or so they think. Uhh, no it isn't because it wasn't a liquidity crisis. The real crisis was that the sink has a hole in it and liquidity has been draining out for a long, long time. And the attempts to re-liquify the markets have been going on for just as long. Yet the hole keeps draining liquidity each time the sink is refilled.
Remember back when no one had heard of liquidity shocks, we were writing that they were coming. They are coming again. And because the Federal Reserve and Washington didn't have the right plan to deal with the crisis, (because they unknowingly created it) and still don't, the flow from the spigot is now a trickle.
When the Federal Reserve started shooting liquidity at anything that moved last September, this was exactly the concern we expressed. No plan and no prioritization in dealing with the crisis would mean we would be unable to effectively deal with serious future shocks. And that is exactly where we are. Wall Street banks are still in serious trouble. The crisis has not been fixed, the spigot ain't got a lot of water in it and now we have even greater debts to manage.
It's good to be the king. But not much longer.
As the pool of liquidity recedes in the economy, its source will be the last to feel the effects and understand its ramifications. That means both Washington and its partner lobbyists from Wall Street and big business feeding at the trough of gluttony have yet to receive their wake up call. I can assure you the tsunami is on its way to Washington and Wall Street.
Do you hear that loud sucking sound yet? If so, we are close to the drain. Politicians, central bankers, most economists and Wall Street think the worst is behind us. They think this was just a liquidity crisis. So, their solution was to re-liquify markets. All is again wonderful or so they think. Uhh, no it isn't because it wasn't a liquidity crisis. The real crisis was that the sink has a hole in it and liquidity has been draining out for a long, long time. And the attempts to re-liquify the markets have been going on for just as long. Yet the hole keeps draining liquidity each time the sink is refilled.
Remember back when no one had heard of liquidity shocks, we were writing that they were coming. They are coming again. And because the Federal Reserve and Washington didn't have the right plan to deal with the crisis, (because they unknowingly created it) and still don't, the flow from the spigot is now a trickle.
When the Federal Reserve started shooting liquidity at anything that moved last September, this was exactly the concern we expressed. No plan and no prioritization in dealing with the crisis would mean we would be unable to effectively deal with serious future shocks. And that is exactly where we are. Wall Street banks are still in serious trouble. The crisis has not been fixed, the spigot ain't got a lot of water in it and now we have even greater debts to manage.
It's good to be the king. But not much longer.
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