Greenspan, regulation and future outlook

Greenspan , the war criminal of the global financial world has come out and finally spoken something. This is what he has to say:

Source: Economics news
-

In 2005, I raised concerns that the protracted period of underpricing of risk, if history was any guide, would have dire consequences. This crisis, however, has turned out to be much broader than anything I could have imagined," Greenspan said in his testimony to the House Committee of Government Oversight and Reform on Thursday.

What?? What doea he mean by '..but it has turned out to be...", You mean you were doing tail-and-error with people's money?? It hasnt turned out to be 'much broader', it has shaken the countries across the board and millions are clueless about what needs to be done next and whether their homes, savings, pensions will be safe.

-

Greenspan said a stabilization in home prices is the ultimate solution, but that is many months away "at a minimum". In the interim, he said the $700 billion Troubled Assets Relief Program is adequate to avoid a severe retrenchment in the economy and banking industry.

TARP (must have been actually called TRAP- to trap people towards a debasing currency). The bailout was ridiculous. The crisis is far beyond house prices, Mr. Greenspan!! Its credit crisis and slowly creeping into Credit cards, Derivatives and every single place where credit is involved, meaning it includes even the currency people use.

-

"The consequent surge in global demand for U.S. subprime securities by banks, hedge, and pension funds supported by unrealistically positive rating designations by credit agencies was, in my judgment, the core of the problem," he said.

Why did you allow such financial instruments in the first place? You had every power to take decision.

-
Once the crisis abates, Greenspan said the financial landscape will be far different and characterized by exceptional caution.

We are just praying one more Greenspan or Bernanke doesnot take charge of 'financial landscape' you are talking about.

"It is important to remember, however, that whatever regulatory changes are made, they will pale in comparison to the change already evident in today's markets," he said.

aaah, regulation? FED needs to be regulated first. Free markets will work. Its the FED who was always interventionist.

Quick Inflation tutorial - 1

Inflation:
Symptom - Rising prices ( usually this is considered as cause )
Cause - increase of money supply in market
Consequences of Inflation - Dont tell me u dont know yet!!
Worst case scenario - Hyperinflation

Increase in price of a certain good can happen in any of the following cases:

1. Increasing the supply of money

2. A decrease in the supply of goods and services

3. An increase in demand, i.e. population increase

The last two cases will result in increase of a particular good and not general price levels in the market.
What is generally explained by authorities as cause for inflation could be any or a combination of below listed reasons:

1. Cost-push inflation as a result of arbitrary demands of labor unions.

2. Profit-push inflation resulting from the greed of businesses raising prices.

3. Crisis-driven inflation resulting from acts of nature or weather.

These reasons are said to account for a large rise in the general price level (not just a relative rise in some prices, such as the price of oil), the economy’s output must shrink by a large percentage. In practice, “supply shock” cases are seldom large enough to account for much inflation and are typically short-lived. For example, of the 9.2 percent U.S. inflation rate in 1980 (as measured by the GDP deflator, gP = 9.2 percent), the negative growth of real GDP (due, in part, to the OPEC oil price shock of 1979–1980) accounted for only 0.2 percentage points (gy = −0.2%). [Source]

Inflation is an increase in the quantity of money and credit relative to available goods resulting in a substantial and continuing rise in the general price level, an increase in the quantity of money caused by government.

I will deal how it happens in later post.