Jul 13 2008
A little ditty for the Bear Stearns Apologists…
It was the rumors of problems that took down Bear Stearns, we’re told. Unscrupulous short sellers betting the stock price would go down supposedly spread rumors about Bear not having enough cash. So, for those throwing daggers at the shorters, well… the above music clip is for you.
For the rest of us, blaming the short community is a lame excuse. The reality is that when a few rumors are sufficient to expose one of Wall Street’s most venerable investment banks / brokers, and then all those in the game suggest that “they really weren’t illiquid” — well, what are we to make of it? How liquid could they have been if they were shopping themselves around since last summer? How liquid could they be if they had only a fraction of the cash around to cover immediately callable obligations?
Welcome to Wall Street’s near 100 year obsession with the ruse that is fractional reserve banking, where only a small fraction of such obligations can be covered. In other words, the entire system knows nobody — Bear Stearns or anyone of their peers — can actually meet the terms of their liquidity options, and that the entire system is rigged based on the assumption that that those who could make claims on these obligations won’t, simply because they normally don’t.
Mind you, we’re not picking on term-based obligations, where a lender agrees to part with assets for a specified period, leaving the borrower to do with them as they please over that period. We’re talking about cash-like or very short-term obligations, where the lender assumes that, at his discretion, he has access to his asset.
“Woah! No way!” is the response you’ll get from the defenders of our system. The system is not designed for everyone to take their money back at the same time, they’ll argue.
This, we point out, it the ruse — the fraud, embezzlement, etc. that is modern banking, and especially so in its refined (and now collapsing) state after nearly 100 years of the Federal Reserve. The proponents are those knee deep and therefore dependent on the system are now demanding that the Fed continue to print the money to support all the baloney they’re obligated to, but tis a tool with a dying lifespan. That’s because inflation has and always be a money supply issue. The more common anything becomes, the less it is valued vs. those things not so common in supply. Hello Stagflation 2008-2012++.
