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Here it is, the dawning of the selloff that will finally put us at levels where ... we will sell off again.
For two years the credit markets have been submerged under central bank happy talk and a sense that the worries were about inflation. You can see why in the outlines of the institutions that are failing now.
The problem is the Europeans got stuck fighting the inflationary war that ended in July. Rates are ridiculously high in Europe vs. the crunching of debt that is happening and will continue to happen.
In our country, the "Fundamentals are Sound" group at Treasury, and the "Whip Inflation Now" group at the
Federal Reserve couldn't switch fast enough either.
But boy, are they great at public relations. There has been remarkable awe at how well Treasury, the Fed and the FDIC are handling the crisis.
It seems very misplaced. Some of it is pure economic ignorance. Fed Chairman Ben Bernanke studied the Depression, or so they say, and knew more about how to stop it than anyone. Actually, he knew
less than anyone, and he and his merry band of governors and presidents presided over the deflationary destruction of Western finance with a bias toward -- are you ready? --
inflation. Yes, that's still their bias. We were able to jump-start the economy in 2003 with rates as low as 1%. But our rates are twice that now even though we are in a deflationary spiral, not an inflationary one. We should be printing money left and right here but Bernanke is Hoover and we all know it now.
There's another sainted figure, who I guess must call the media all the time to burnish his image. That's Tim Geithner, the Federal Reserve Bank of New York president, who is supposed to be the eyes and ears of the Fed. We learn from
The New York Times Monday that Geithner was the genius behind the "not too big to fail" decision to keep
Lehman out of the Federal Reserve system. That was brilliant. We had rescued
Bear, but not twice-its-size Lehman, perhaps because the watchdog/press hound Geithner didn't understand the complexity of Lehman's book, or because it was time to mete out punishment to the worst banker on earth, Dick Fuld.
Jim Cramer
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