Myths exploded:
http://www.mises.org/story/1627
1) Cental bankers are independent of each other. FALSE, they act in concert
2) Central bank never intervene in matters of private equity. FALSE Long Term Capital, the and the law of big numbers disproved this
3) Prudent Man doctrine influences central bankers FALSE, they react to market meltdowns as any caged rat would to a flame
4) Central bankers will NOT interfere with bankcruptcies resulting from failed judgment. FALSE, case by case basis exceptions, LTC was bailed out,
Modern central banking policy: Bailout economics, steroids for sick rich patients.
1) 1987 stock market crash fallowed by the Alan Greenspan legacy action
October 19, 1987 Policy statement: "The federal reserve, consistent with its responsibilities as the nation's central banker, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system."
2) LTCM hedge fund was bailed out in October 1998
3) Wall Street equity melt down in 2000
4) Fixed market commercial credit crisis (present bailing underway)
5) CDOs, SIVs, off-shore hedge funds, Big Bank loans to sick hedge funds (underway with open market purchases of junk notes by both ECB and US fed)
'It was merely a question of how you would do it, not if' Big Al.
We're off the Gold standard for a reason. So that central bankers can override currency and debase consumers, in order to subsidize fraud and hedge fund errors of judgment and out-and-out off-shore crimes.
The legacy for all central bankers is to act to debase currency as needed. To be the lender of last resort. Wall Street will NO LONGER trade in CDOs, therefore, central banks must buy them and hold them until maturity/or default. ($5 TRILLION US might get that done, maybe)
Today, junk paper bailouts are needed bigtime, along with rate cuts.
