{"id":58051,"date":"2021-05-28T06:53:26","date_gmt":"2021-05-28T11:53:26","guid":{"rendered":"https:\/\/olduvai.ca\/?p=58051"},"modified":"2021-05-28T06:53:26","modified_gmt":"2021-05-28T11:53:26","slug":"systemic-risks-abound","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=58051","title":{"rendered":"Systemic Risks Abound"},"content":{"rendered":"

Systemic Risks Abound<\/a><\/h3>\n
\n

If you wanted to design a system guaranteed to collapse in a putrid heap, you’d make moral hazard ubiquitous and you’d make the system 100% dependent on a hubris-soaked faux savior.<\/i><\/p>\n

For the past 22 years, every time the stock market whimpered, wheezed or whined, the Federal Reserve rushed to soothe the spoiled crybaby.<\/b>\u00a0There are two consequential results of the\u00a0Fed as savior<\/i>:<\/p>\n

1. The Fed has perfected\u00a0moral hazard<\/i>:<\/b>\u00a0everyone from the money manager betting billions to the punters gambling their stimmy money is absolutely confident\u00a0I can’t lose because the Fed will always push the market higher.<\/b><\/p>\n

What happens when participants are confident they can’t possibly lose? They make ever-riskier and ever-larger bets.<\/b>\u00a0The entire nation is in the grip of a\u00a0moral hazard<\/i>\u00a0mania, all based on the confidence that the Fed will always push every market higher–always, without fail.<\/p>\n

2. Organic (i.e. non-manipulated) market forces have been extinguished.<\/b>\u00a0There is now only one consequential force, the Fed. All markets are now 100% dependent on the Fed responding to every bleat from every punter who’s recklessly risky bet is about to go bad.<\/p>\n

The Fed is now the perfect union of quasi-religious savior and\u00a0Helicopter Parent<\/i>:<\/b>\u00a0oh dear, our little darling got high and crashed the Porsche? Quick, let’s save our precious market from any consequences!<\/p>\n

Every day, Fed speakers take to the pulpit to spew another sermon about the Fed’s god-like power and wisdom.<\/b> The true believers soak up every word: golly-gee, the Fed is better than any god–it’s guaranteeing I can get rich if I just leverage up any bet in any market!<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Systemic Risks Abound If you wanted to design a system guaranteed to collapse in a putrid heap, you’d make moral hazard ubiquitous and you’d make the system 100% dependent on a hubris-soaked faux savior. For the past 22 years, every time the stock market whimpered, wheezed or whined, the Federal Reserve rushed to soothe the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[24078,303,1849,6768,587,690,3650],"class_list":["post-58051","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charles-hugh-smith-2","tag-fed","tag-financial-markets","tag-moral-hazard","tag-of-two-minds","tag-risk","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58051","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=58051"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58051\/revisions"}],"predecessor-version":[{"id":58052,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58051\/revisions\/58052"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=58051"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=58051"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=58051"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}