Saturday, November 5, 2011

G-Pap spreads diarrhea all of the modern world...

Now G-Pap is dressed in a nice suit and walking through the beautiful sunset for his action shots…he wants us to believe that he will form a consortium - by Monday!...yet his work is more grotesque than that of the lowliest sewage worker. The thing is that I actually respect a sewage worker…he does not pretend to be something he is not…he is really working in the sewer. However, our politician friends work several levels beneath the sewer and pretend that they are sailing on pristine fresh water lakes in 20 knots of wind - at their backs no less. 

G-Pap has spread his venom to Europe and to the US via the incompetent regulators and officials that are supposed to keep us and the fincancial system safe and in order. Even more disturbing is that G-Pap has been afforded this opportunity by even higher level leeches like Ben Bernanke, Alan Greenspan, Robert Rubin and Larry Summers and their assorted cronyists who thought that Trichet and the ECB were actually a good idea and who believe that the only way to fix the problem of spending too much, is by borrowing more and the only way to fix the problem of borrowing too much is to borrow more and spend more. These are not really very complex problems but they have gained their circular logic due to the nature of politics and the surreptitious nature of compensation of officials and cronyists. 

G-Pap has now exported to the US, via the MF Global disaster, the concept that the way to fix too much risk is by granting even more risk and then closing the eyes. All of the big futures exchanges have granted risk waivers of sorts by reducing margin rates to maintenance margin on all futures products supposedly to handle the smooth transition of accounts from MF Global to their new FCM's. Anyone who believes that a harebrained plan like that coming from a regulating body will work as planned is smoking something pretty potent. These same regulators watched as MF Global (and who knows how many others) used their client money to trade…and did nothing for years…but NOW they have an interesting plan and idea and its REALLY going to work. NOT! 

The reality is that when there is blood in the water the sharks will be circling…especially when the prey is wounded and weak. The regulators are weak, MF Global investors are tired and weak and the market and the system as a whole is weak…I think the answer as to who is the hunter and the hunted is easily answered. The regulators have now succeeded in taking one disaster and magnifying it into the beginning of the biggest capitulating global liquidity crisis in history. 

If regulators wanted to deal with this issue, they could have granted specific credits or options on futures/buying power to MF Global customers not all of wall street. Publishing that the MF Global situation was such a debacle that they are willing to change policy and risk protocol dramatically is rife with its own unforeseen risks. Those risks are going to be watched VERY closely by the sharks quietly circling the pending disasters. What’s more is that anyone trapped does is only getting what they deserve, there have been plenty of warnings. Capitulation of the prey and of the regulators by the great white market sharks should not be far off.

The reality is that the government has now once again demonstrated that its answers to problems of over leverage and risk taking are more risk and more leverage. As we know the problem of being pregnant can not be solved by being more pregnant - so the problems of MF Global and the European system can not be solved with such a circular and catatonic approach any better.

Regulators and investors subscribing to this perspective are committing suicide and their demise will be brutal and swift.
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