In
Response to Dear Bishop: That Fed Chaos model of yours is very interesting, and I have not seen it articulated elsewhere (unlike most models.) The confusion is clearly palpable. Your essay elicited my perceptions described below. Whack-a-mole 101 I read a Mauldin article (actually, an article within an article) last week that was ostensibly unrelated to your model, but which the outcome may be very related. The suggestion was that the future economy would be idea-based (proprietary claims being more important than big factories.) Forget about whether it sounds like new era nonsense, the claim was that it would be a very fast paced investment world in which decisions had to be made on time scales that would be considered short by modern standards. It was further suggested that money managers would become more important, because retail investors would not be able to play whack-a-mole (my term, not his.) This elicited an analogy on my part: It sounded like hyperinflation in South America. I had just completed a book on the topic and was struck by the statement that business defaults occurred because decisions had to be made so quickly as to create implosions. FOMC Induced Fetal Position So now, what do FOMC-induced chaos, a fast-paced intellectual-property-rights-based futuristic economy, and hyperinflationary economy have in common? I think at some point investors capitulate. They declare, "This sucks. I quit" and go find a tin can to bury their wealth in the form of some durable form of money. (The gold bugs hope this statement to be literally true.) I think it is generally the case that one could measure how poorly markets are doing by the percentage of the population curled up in fetal position. The Road to Serfdom or Just Circling the Racetrack at Indie? In case it hasn't been inferred, I have had a monotonously growing disdain for Greenspan and all things FOMC. I expect the politicians to act like morons, but the FOMC has, at times, acted differently. I have this growing anxiety that we are really all just serfs (Gates being the richest serf.) The Lord of the Manor or Feudal King is the banking industry. Is this old money (Warburg/Rothschild/Medici even) or just a huge organism comprised of 10 million cubicles and no central nervous system? I don't know, but the general model looks right to me. For the record, I was a diehard fiscal conservative with passion for the free market. Now I've degenerated to a libertarian, curled up in the fetal position, wondering what happened to the free market. Just pondering... Colt .45 – Everyone’s Favorite Revolver Back to Fannie Mae… I've been sweating the money market issue. I've got a ton of T-backed money market money, but I've got a sizable portion of money that's operationally like money markets in TIAA. I happen to have it in a quick roll-out account and have had my finger over the trigger to send it off to the world of T-backs as the Fannie story has evolved. You have inspired me to do so -- tomorrow. Thanks, Thomas EDITOR'S
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