Reckoning from Baltimore, Maryland…
The outsiders make…the insiders take.
Nothing much happened last week. Except that Ben Bernanke told investors that the fix was in…and the stock market went up. The chief of America’s central bank told the world that he was prepared for more QE whenever it was needed.
When will it be needed? When the stock market goes down!
So, why not? Why not buy stocks? What can you lose? If they go up, you keep the gains. If they go down…ol’ Benny will be there with wads of cash to buck them up.
Cash…cash…cash… How much do you need?
A million? A billion? A trillion? Hey, the sky’s the limit. Bernanke is ready. As much as you need…when you need it.
After so many years of fixes (it’s been 5 years since the subprime crisis began) we’re getting to know how the fixes work.
Let’s start with the money. When a fix is needed, the feds come up with money. But everyone knows the feds are broke. So where does the money come from?
“Out of thin air,” was an expression used by John Maynard Keynes. But how could that be? How can you get cash…money…out of nowhere? And what kind of money could it be…if you could get it at no expense? It must be a “funny” money…a zombie money…
It must be worthless, right? But it’s not. That’s the crazy thing…the Fed plucks this money out of the air…gives it to banks…and they can use it to pay for a pizza. Or an automobile. Or a sovereign bond.
The problem — especially now in Europe — is that the money that comes from nowhere goes nowhere. The ECB lent it to the banks. The banks lent it to the government. And pfhhht! It was back to where it came from — nowhere.
Now, the Financial Times reports that the banks are down to their last few billion. Snniff. Sniffle. Poor bankers. They better save their last billions to pay bonuses.
That’s what they’re thinking too. They’re not buying government bonds the way they used to. Trouble is, the governments of Spain, Italy and others need the money. So, they go to the European central bank and ask for more of that ‘nowhere money’:
“You gotta give these banks more money so they can give us more money… Otherwise, we’re going to default…and you can say goodbye to Europe…”
Whether that would be good or bad, we don’t know… We’re still wondering where that money came from. Where, exactly, is nowhere?
How could there be a place…like…nowhere? We mean, if it is nowhere…it can’t be somewhere. So there can’t be a place that is also nowhere. So, if money really does come from nowhere it is…like…really not there.
Can someone help us with this?
Lately, we’ve come to the conclusion that this whole thing is a scam. The money is a scam. The economics behind it is a scam. The way it is lent out…is also a scam.
Let’s look again at where the ‘nowhere’ money goes…
for Markets and Money
From the Archives…
2012-04-27 – Nick Hubble
2012-04-26 – Bill Bonner
2012-04-25 – Greg Canavan
2012-04-24 – Tim Price
2012-04-23 – Dan Denning