Am I wrong about AIG?

[Wombaticus Rex]

Cuda, would you elaborate a bit on how that diverges, or what you're diverging from? I pretty much agree with all of that and it's good stuff.

You're saying the QE insta-yield is a far bigger factor in our non-recovery than the overall reduction in yield across market segements and products?

[barracuda]

I guess I'm saying that the climate for high-end investors hasn't been significantly effected by the '08 crisis and it's repercussions. They couldn't find high enough returns in the late '00's, so they turned to derivatives and insurance scams for yield and left the stocks to the penny skimming quants.

The returns from arbitraging borrowings from federal lending facilities isn't and hasn't been enough to maintain global finance needs - the LIBOR scandal pretty much confirms this - and so the trend is once again to increase leverage and relentlessly dally in exotics. All the QE's are just keeping heads above water. It's nice, but even ZIRP has to be repaid eventually, meanwhile the excuses for continuing MBS purchases - unemployment? - are increasingly transparent. QE3 will not affect employment levels, right? No fucking way. How does zero percent interest for three more years address employment or lending towards job creation? It really doesn't, it's about something else: maintenance costs.

[Wombaticus Rex]

Cool, we're pretty much on the same page, then. I definitely don't think that 08 "changed the world" - I think decades of relentless strip-mining of everything decent and wholesome has destroyed the world, and certainly the global markets. We are entering the Requiem for a Dream phase of shooting the needle directly into infected bruises at this point.

Cheers!

How could they have done as well in weathering through (pretending their way through) the crisis, if they had kept interest rates higher, for one thing?

I don't see what other option there was, honestly. The party is over, it's all buying time from here on out. I think that recent epic apologia in The Atlantic for Geithner was, annoyingly and cloyingly, fundamentally correct that Timmy Did Good. In the worst possible way, but still: he executed under pressure and he's been proven right. "Right," really, since the standards and measurements are themselves fucked in this situation.

OMNIDIRECTIONAL PERVERSE INCENTIVES

[JackRiddler]

Relevant to some of the discussion here (interest rates)

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