Zero

That’s the new target interest rate announced by the US Federal Reserve today (with a margin of up to 25 basis points). It’s also, following the $50 billion Madoff fraud and the increasingly widespread suspicion that the entire bailout scheme has been operated to promote the interests of Goldman Sachs at the expense of its competitors and the general public, an upper bound for the credibility of the global financial system. And it’s a pretty good estimate of the probability that we’re going to avoid a recession worse than any since the Great Depression.

Without a household name like Citigroup or GS going bust, it’s hard to convey the seriousness of the latest news in an environment where we are already inured to financial cataclysms. But it seems pretty clear that the last couple of days spell the end for both hedge funds (many of which have lost a fortune with Madoff and all of which are subject to invidious comparisons with his decades-long Ponzi scheme) and money market funds, which can’t possibly cover their costs while paying positive net returns, given a funds rate of 0.25 per cent.

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29 thoughts on “Zero

  1. For parties interested in the the Madoff scam the following article exposes that the absolute incompetency of the SEC; they had been informed about this way back in 2000.

    http://clusterstock.alleyinsider.com/2008/12/busting-bernie-madoff-one-mans-10-year-crusade

    The article begins with:

    The Wall Street Journal has published a detailed account of private fraud investigator Harry Markopolos’s efforts over the past 10 years to persuade the SEC that Bernie Madoff was running a gigantic Ponzi scheme (or, at best, was front-running).

    Markopolos submitted extensive analysis to the SEC in 2005, which we’ve embedded below. The SEC did conduct an investigation thereafter, in the course of which Bernie Madoff “mislead” them about the nature of some of his dealings with his primary fund-of-funds promoter Fairfield Greenwich Group.

  2. Finally a use for Gitmo that all can agree on–put the incompetent SEC regulators there, oh and Hank Paulson, Barney Frank and Chris Dodd, R Holder Mr Obama’s new AG, any one who made money from their time at Fannie and Freddie, the people who gave GWB an MBA from Harvard, Janet Reno for threatening banks who did not extend credit to people in the US to buy a house for which they had no business getting a mortgage, the people who created the ultimate weapon of mass destruction the derivative SWAP(Soiled WorthlessAssPaper) Next, hang Madoff from one of the flag poles on the NASDAQ.
    And Remember: If you stacked all the economists in the world head to toe from here to the moon… you’d be doing the world a favor: most would die from the fall to earth and the rest would float off into the abyss of space.

    /facts are stubborn things- John Adams

  3. In general, if one intends genuine discourse then the preciseness of language or thought is a must– it avoids confusion. Need I say more?

    Well you could start by explaining how your attempt at clarification (which I quoted in comment 21) entails any precision what so ever. It seem to me like a rather imprecise distinction.

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