Monetary Malpractice

Moral Hazard, Unintended Consequences & Dysfunctional Markets

Gordon T Long
7/14/2012

August 2012 Edition

1

Copyright 2012 GordonTLong.com

Restricted
All Rights Reserved

general@GordonTLong.com

Monetary Malpractice
Moral Hazard, Unintended Consequences and Dysfunctional Markets

AUGUST MONTHLY MARKET COMMENTARY

BIG PICTURE - KEEPING YOUR PERSPECTIVES............................................................................................ 4
HIGHLIGHTS - WHAT YOU NEED TO KNOW .................................................................................................. 7
SUMMARY ANALYSIS .............................................................................................................................................................................. 7
"BERNANKE'S BOX": Political Pressures Greater than Escalating Economic Pressures .............................................................. 12
Defining Chart #1 - Long Term.......................................................................................................................................................... 12
Defining Chart #2 - Long Term.......................................................................................................................................................... 13
Defining Chart #3 - Intermediate Term............................................................................................................................................. 14
Defining Chart #4 - Short Term ......................................................................................................................................................... 15

MONETARY MALPRACTICE .................................................................................................................... 18

Moral Malady ............................................................................................................................................................................................. 18
Dysfunctional Markets .............................................................................................................................................................................. 19
Distortions ............................................................................................................................................................................................ 19
Deceptions ........................................................................................................................................................................................... 21
Delusions ............................................................................................................................................................................................. 22
Death of Equities ....................................................................................................................................................................................... 22
Investing, Speculating or Gambling?................................................................................................................................................ 24

STAGE 1 SYMPTOM - MORAL HAZARD ..................................................................................................... 25

Penalize Savers, Reward Debt ............................................................................................................................................................... 27
Attitude Shift: From "We" to "They" ........................................................................................................................................................ 27
Misplaced Incentives on Wealth Creation.............................................................................................................................................. 27
Malpractice, Malfeasance & Malinvestment .......................................................................................................................................... 31

STAGE 2 SYMPTOM - UNINTENDED CONSEQUENCES.................................................................................. 31

US Markets Now Addicted To Endless QE ........................................................................................................................................... 31
US Corporations Now Addicted To Endless QE ................................................................................................................................... 34
Bond Markets Corrupted By QE Resulting in a "Maturity Crunch" ..................................................................................................... 35

STAGE 3 SYMPTOM - DYSFUNCTIONAL MARKETS ...................................................................................... 39

Delusional Expectations ........................................................................................................................................................................... 39
Absurd Schemes Underpin the Markets: ............................................................................................................................................... 41

CONCLUSION....................................................................................................................................... 42
Policy of "Smudge & Fudge" ................................................................................................................................................................... 42
Where it Leads: STATISM ....................................................................................................................................................................... 43

August 2012 Edition

2

Copyright 2012 GordonTLong.com

Restricted
All Rights Reserved

general@GordonTLong.com