Laughing Boy in the Third – 50-1 – or Your Money Back!

So – just how long did what commentators are already calling the “Bernanke Bounce” last?

Just about long enough to enable a few more suits to bale out and open their parachutes.

Ben Bernanke is the Chairman of the US Federal Reserve – which yesterday announced a startling .75% cut in interest rates.

This was nothing less than naked & feverish panic. I’m sure if you got a close look at him or any of his minions, you would have seen sweat trickling down their faces and their hands trembling in fear. I expect the triple Martinis will be washing down a few valium in Washington tonight.

Bernanke and his advisers are not stupid. They will have known what a colossal gamble the cut was. They will have thought “what if this doesn’t work?” And it didn’t.

Instead of acting as some kind of magical “health pack” of the kind gamers might pick up in a first person shooter to cure them of the 57 Uzi wounds ‘they’ just received, what they got when they came around the corner was the slavering space-alien boss. And guess who just used their last remaining piece of ammunition? Game Over.

I said in my first post that the world occupied by economists did not necessarily bear much relationship to what you & I might regard as reality. The irrationality of the scene was reinforced by the sight of Bernanke heaping compound woes upon the markets in a manner which was little more than an even more extravagant signal of despair than the sight of ‘Dubya’, announcing a huge cash injection last Friday.

I mean – like things aren’t bad enough already? And you wheel out a man who possesses the cognitive functions of a cane toad with a Jack Daniels hangover – who happens to occupy the most powerful job on Earth. And this spectacle was supposed to be reassuring?

Bernanke and the rest of the Washington policy wonks may as well have run naked up and down Pennsylvania Avenue screaming “Don’t panic! Don’t panic”.

Others have described Friday’s cash bale-out as “Social Security for the rich” – a very apt description.

It’s another illustration of just how far removed from reality the so-called “Iron Law of the Market” is. These people gambled – they took the “risks” that supposedly justify their $100 million bonuses – they brought their allegedly great skills to the table – and they blew it. They lost. And they lost not through some cruel trick of fate – but because they were gripped by a kind of collective stupidity; a misguided belief in some kind of miraculous bootstrapping pyramid scheme which could just go on and on.

Now ask your self – if you or I cocked-up this badly in our jobs, what would happen?
Look at it another way. If you or I went down to the bookies and put our salary on Laughing Boy at 50-1 in the 3.10 at Kemptown – and it fell over – the full, inescapable “market” consequences of our actions would fall upon us.

Now imagine our hedge fund manager, banker or stockbroker who did the same. In the strange, parallel universe occupied by these people, they would just go down to the bookies and ask for their stake back.

And the bookies would hand it back to them – and for good measure, recover their losses off of taxpayers.

Neat, no?

I’ve never gambled before, but hell, if this is how it works, next time I’m passing a betting shop, I’ll nip in and offer them this kind of arrangement.

Stuart Syvret.

Book of the Post:

The Party’s Over, by Richard Heinberg.

Joke of the Post:

Two economists find themselves locked in a dark dungeon. The hours pass, yet no guard comes with food. One says to the other, ‘don’t worry – when we get hungry enough our demand will generate the product.’

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