I've Seen This Movie Before (Bailouts & Greece)
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2010-02-28 23:34 by Karl Denninger
in Editorial Ignore this thread
I've Seen This Movie Before (Bailouts & Greece)

I seem to remember once upon a time when Charlie Gasbag-a-rino would come on CNBS virtually on a daily basis, with the DOW down 200, and announce that Ambac, MBIA or both were "about to be bailed out" - attributed to "sources."

Only one problem with this, you see - it never happened.

Then there were the claims that Warren Buffett was going to buy, well, the world.  That never happened either, but it was always good for a pump here and there in the markets - only when they were in danger of really tanking, of course.

And now we're seeing it again, this time with Greece.

Over the weekend we have seen multiple competing reports of some sort of "deal", starting right near the close of the US market on Friday.  It was undoubtedly responsible for the near-meteoric rise of the futures into the lock-up - nobody would want to hold short into the weekend with such a thing happening, right?

Well now Angela Merkel has said - once again:

"there is absolutely no question of it".

"We have a (European) treaty under which there is no possibility of paying to bail out states in difficulty," Merkel told ARD public television.

Right. 

Maybe.

But let's look at the facts here.

Is this really about bailouts?

Or is this just more criminal manipulation of markets, with certain privileged players placing bets in the marketplace, then starting rumors?

After all, the blatantly-obvious front-running of the famous August 2007 Discount Rate cut wasn't investigated - or prosecuted, even though a three-year old could look at the chart for the day before and see that obviously someone (or a group of someones) knew in advance that Bernanke was about to do that - and they traded on it.

Then there were the AMBAC/MBIA rumors, the incessant Buffett rumors, the shorting ban (which was also traded on in front of the announcement by an afternoon) and more.

Not one of these has led to a formal investigation, yet all trades are trivially traceable.  If the government gave a good damn about prosecuting this sort of information leak and front-running, all of which is illegal by the way, the records do exist.  All they have to do is look.

This sort of corrosive and pervasive scam destroys confidence in our capital markets.  I am convinced that a huge part of the reason that we had the collapse we did in 2008 and early 2009 - the reason it was so violent and essentially impossible to control - was that confidence in the markets had been destroyed by months of outrageously unlawful conduct in this regard.

When the "triggering thing" happened - Lehman - it just all came apart at once, since nobody trusted anything any more.

What makes anyone believe this is over?

The scam machine is still running.  The rumor-mongers are still plying their wares, getting in front of the alleged news (even though it is repeatedly faked) and stealing investors money - time and time again.

We have learned nothing.  Our law enforcement agencies and politicians have not only learned nothing, they have put in place the very same instabilities that led to the collapse last time.

It will happen again, and probably sooner than anyone expects.

Our SEC is a joke and the international regulators are even worse.  We have no desire among those people to investigate the outrageous actions of these scam-meisters and lock them up.  We should, but we don't.

Your memory should be good enough to remember what happened the last time.  It should also be good enough to remember why it happened the last time.

We've changed nothing.

Are you insane enough to believe that the outcome - having done the same thing - will in fact be different?