Comments on: Bank leverage: forever blowing bubbles part two http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Anonymous http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56956 Anonymous Sat, 29 Aug 2009 15:35:00 +0000 http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56956 Sadly, it seems our Fed is a one-trick pony: the only way it knows to foster growth is to blow bubbles. One might have hoped Bernanke had learned something from the Greenspan bubble debacle, and might hint at raising rates, or at least try to talk down the markets -- but this does not seem to be the case. He doesn't see any inflation beyond the CPI. This is a colossal and dangerous intellectual failure. When will the markets understand that there is nothing fundamental underpinning this rally, that it is only a monetary reflation? Can we as a nation afford the collapse of yet another bubble? This doesn't promise to end well. Sadly, it seems our Fed is a one-trick pony: the only way it knows to foster growth is to blow bubbles. One might have hoped Bernanke had learned something from the Greenspan bubble debacle, and might hint at raising rates, or at least try to talk down the markets — but this does not seem to be the case. He doesn’t see any inflation beyond the CPI. This is a colossal and dangerous intellectual failure.

When will the markets understand that there is nothing fundamental underpinning this rally, that it is only a monetary reflation? Can we as a nation afford the collapse of yet another bubble? This doesn’t promise to end well.

]]> By: hbl http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56954 hbl Sat, 29 Aug 2009 15:18:00 +0000 http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56954 Good clarification... re-reading I see that asset choice was your main point. I think I was responding more to the tone of the article you linked titled "Leverage Rising on Wall Street at Fastest Pace Since ‘07 Freeze". Good clarification… re-reading I see that asset choice was your main point. I think I was responding more to the tone of the article you linked titled “Leverage Rising on Wall Street at Fastest Pace Since ‘07 Freeze”.

]]> By: Edward Harrison http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56952 Edward Harrison Sat, 29 Aug 2009 13:29:00 +0000 http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56952 Hbl, I haven't had a chance to look at the Fed data yet but reflation is not working because the FDIC reports that the bank sector is still reducing assets. So one could view this in the light I suggest, namely we are seeing a re-allocation of resources from less to more risky assets as the low interest rates have caused inventors to need to increase risk profiles to generate the return they seek. But just like in prior episodes, this is likely to end badly as the excess return means excess risk that will become evident only during the next downturn. It seems this crisis has meant we have collectively learned nothing. Hbl, I haven’t had a chance to look at the Fed data yet but reflation is not
working because the FDIC reports that the bank sector is still reducing
assets.

So one could view this in the light I suggest, namely we are seeing a
re-allocation of resources from less to more risky assets as the low
interest rates have caused inventors to need to increase risk profiles to
generate the return they seek.

But just like in prior episodes, this is likely to end badly as the excess
return means excess risk that will become evident only during the next
downturn. It seems this crisis has meant we have collectively learned
nothing.

]]> By: hbl http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56948 hbl Fri, 28 Aug 2009 21:00:00 +0000 http://www.creditwritedowns.com/2009/08/bank-leverage-forever-blowing-bubbles-part-two.html#comment-56948 Troubling. To put it in quantifiable historical context, do you happen to know which "Federal Reserve data" the article is based on? (I'm guessing somewhere <a href="http://www.federalreserve.gov/econresdata/releases/statisticsdata.htm" rel="nofollow">here</a> but can't search now). <a href="http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&id=TOTBKCR,&transformation=lin,&scale=Left,&range=Custom,&cosd=2008-01-01,&coed=2009-08-12,&line_color=%230000FF,&link_values=,&mark_type=NONE,&line_style=Solid,&vintage_date=2009-08-28,&revision_date=2009-08-28,&mma=0,&nd=,&ost=,&oet=," rel="nofollow">TOTBKCR</a> (one of the weekly updated series) doesn't yet show marked reflation in TOTAL bank credit... but of course that isn't the only type of lending and the total could mask a growing trend within the finance portion. Troubling. To put it in quantifiable historical context, do you happen to know which “Federal Reserve data” the article is based on? (I’m guessing somewhere here but can’t search now).

TOTBKCR (one of the weekly updated series) doesn’t yet show marked reflation in TOTAL bank credit… but of course that isn’t the only type of lending and the total could mask a growing trend within the finance portion.

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