On the reckoning in high finance

I rarely comment on the politico-economic environment — my politics being somewhat imperial and hard to translate to the current age.  Yes, imperial, as in Roman imperial… my idea of the “good old days” is here :-) 

However, Bill Taylor’s post (here) brought this silverback out of the trees.  I can understand the anger, but why is everyone “shocked… shocked” when the gamblers scatter after yet another bust following yet another Fed-driven boom?  (BTW, a pretty good summary is here.)  I mean, who gets first dibs on Fed financing?  Well, financial institutions, of course.  It should be no surprise that the financial industry in its various guises (including real estate) will always be the prime boomer and buster in a credit-fueled expansion.

It is also no surprise that Wall Street attracts the many of the best and brightest (irony alert, see here).  Combine the allure of a high-stakes game with the lure of trying to figure out how to make it “different this time” and who could resist?  Sadly, too many couldn’t…

When there was a lot of cheap money around a lot of people who in “normal times” wouldn’t be able to raise money for a fund managed to.  They were unremarkable market talents but when the market goes up everyone believes they are a genius.  They managed to “go with the flow” long enough to get pretty big, but when things got difficult again it turned out that they weren’t so amazing after all.  (from comment here)

Of course, the real question is: why does the Fed feels compelled to push rates so low again and again?  It wouldn’t be those pesky entitlements or tax cuts or pending elections, would it?  And who is pressing money managers to chase returns and yield for mutual funds, house prices, investment accounts, etc.?

Perhaps the fault, dear citizens, is not in the stars, but in ourselves, that we are underlings. 

And that we’re pissed that we missed the last winning spin of the roulette wheel. 

To only slightly mix my metaphors, let’s keep the long knives sheathed for a bit.  Otherwise we may end up using them on ourselves.


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