"Quantitative Easing??" Try, "Printing More Idiots"

Is the Fed Repeating
Wall Street's Sins?

Joe Nocera: At a certain point, Wall Street ran out of clients to sell [securitized debt] to. So the only way it could keep the machine going was to buy it themselves.

Jon Stewart: So, they infected themselves. At the end, they themselves became vampires.

[Which suggests] a new theory on the financial crisis: it occurred because of an idiot shortage. If I'm the Fed, I just print more idiots.

--Bethany McLean and Joe Nocera Interview; The Daily Show (11/16/2010)

That's it!

Instead of calling the Fed's current monetary policy something arcane like "quantitative easing," how about calling it "printing more idiots?"

At least, that's how I understand it.

Just like Wall Street ran out of "idiots" to sell securitized debt to, the U.S. Treasury has started to run out of investors to buy (more) U.S. debt.

China already stuffed to the gills with U.S. bonds?

Ditto for Japan, Singapore, South Korea, Saudi Arabia and all our trading partners on the other side of our yawning trade deficit?

No problem -- we'll buy the bills and bonds ourselves!

Two years, five years, ten years . . . you name it.

In fact, we -- the Fed -- will buy so much, we'll actually drive interest rates down.

Which is quite an accomplishment, given that long term interest rates have already collapsed, and short term rates are effectively zero.

Nothing could possibly go wrong with such a scheme . . . . right??

United Against . . .. Consumers??!!

Banks and Bank Regulators

Best nugget -- OK, boulder -- I've run across the last few weeks discussing banks, bank regulators, and the tortured birthing (maybe) of a consumer financial protection agency:

The real reason current regulators don’t pay more attention to consumer problems is not that they are evil (well, mostly they’re not), but that they have another mission that takes priority. They are charged with insuring the safety and soundness of the banking system. And safety and soundness means making sure that banks have enough capital — and are compensating for loan losses. When a bank decides to raise a customer’s credit card interest rate to 35 percent to make up for losses elsewhere in the credit card portfolio, that believe it or not, is a good thing from the perspective of safety and soundness. Even though it is a terrible thing for consumers.

--Joe Nocera, "Have Banks No Shame?"; The New York Times (10/9/09)

P.S.: my first "real" post-college job -- about 25 years ago(!) -- was as a CPA. My specialty? Auditing small banks and agricultural co-ops.