"the utter moral bankruptcy of the G-7 countries that will soon translate to financial bankruptcy"

[marmar]

from the Asia Times:



Goldplay
By Chan Akya

"News reports confirm that a two-seater Cessna aircraft crashed into the local cemetery near Washington this morning. Police on the scene have uncovered 100 bodies so far and expect to find many more."

Yes, that certainly is an awful joke; but it well typifies the unintended consequences of actions undertaken by the world's central banks from the past few days. In no particular order, we had the following major developments this week:
1. Egged on by the act of the Federal Reserve buying up US Treasury bonds, the Treasury unveiled its very popular but completely brain-dead proposal for a public-private initiative aimed at removing loans and securities sitting on the moribund balance sheets of US banks.
2. The president of the European Central Bank (ECB), Jean Claude Trichet, rejected demands for an increase in stimulus spending in Europe, a point of contention with the Barack Obama administration.
3. Bank of England governor Mervyn King warned that inflation could worsen in the United Kingdom and require a sharp increase in interest rates thereafter.
4. The governor of the People's Bank of China (PBoC), Zhou Xiaochuan, called for a replacement of the US dollar as the global reserve currency.

At first glance, each of those statements is wonderfully consistent with the requirements of the immediate economy that they are responsible for as shown below:
a. The US banking system is has shown to be refusing loans to businesses given the sharp economic downturn and the impact of further credit losses on the balance sheet that help erode their capital base and thereby make new loans more problematic. By showing a program that ostensibly removes problem loans from bank balance sheets at prices that are "agreed" to by private sector participants, the US government can help the banks clear the logjam and perhaps initiate new lending. The Fed demonstrated its willingness to in essence print currency to allow for an inflation in asset prices thus entailed by the US Treasury moves.
b. In Europe, countries have been fiscally irresponsible during the boom period and are thus constrained in their ability to expand the purse strings into a downturn. Further, the workings of the bond market dictate a shift of pain from the weakest to the strongest economy; in turn rendering the currency (Euro) less credible by the passing day. ..........(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/KC28Dj03.html

[burythehatchet]

1. Clearly an Asian PUMA

:shrug:

[Swede]

2. Your head line of this thread had nothing to do with the story.

:shrug:

[marmar]

3. It's pulled from the subhead for this story on the Asia Times' World Economy page........

http://www.atimes.com/atimes/Global_Economy.html



The actual headline, "Goldplay," was too obtuse for me.

[Swede]

4. Just keeping you on your toes.

I liked the quote "owe someone a million dollars and you're in trouble,owe them a billion dollars and they're in trouble"