# TheBernank.......Hilarious........



## sags (May 15, 2010)

This is a link.....I don't know how or if we can inbed video on this site.......to a hilarious cartoon explaining Quantive Easing. The video has gone viral and been viewed millions of times already.

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded#!

The cartoon is made at a website that anyone can use to make a cartoon. I have seen some other ones that were just as funny. Caution though, there is sometimes some cussing involved.

Some brilliant people out there doing these.


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## ramy98 (Sep 20, 2009)

thanks for the clip!


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## andrewf (Mar 1, 2010)

A little bit of knowledge is a dangerous thing.

Apparently deflation is good! 1930s, here we come! Jack interest rates up to the moon, so the people can afford the more things.


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## w0nger (Mar 15, 2010)

roflmao... that was hilarious...!


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## Larry6417 (Jan 27, 2010)

andrewf said:


> A little bit of knowledge is a dangerous thing.
> 
> Apparently deflation is good! 1930s, here we come! Jack interest rates up to the moon, so the people can afford the more things.


Actually, the quote is," A little *learning* is a dangerous thing."
See www.brainyquote.com/quotes/quotes/a/alexanderp121722.html

If the U.S. Fed claimed it was raining, I'd look through a window to confirm. The Fed (and Treasury) have an awful record. Both Bernanke and former Treaury Secretary Paulson grossly underestimated the importance of the sub prime debacle. The prior Fed chairman, Greenspan, argued against rules on futures/options trading and maintained excessively low interest rates, and has only belatedly, and begrudgingly, accepted a modicum of blame.

The Fed's arguments for QE are muddled - not exactly confidence-inspiring. The Fed claims (I don't say I agree) that QE is not inflationary because it's just asset swapping i.e. the duration of the debt is the only thing that changes. Bernanke has claimed that QE has a mild *deflationary* bias. See www.businessinsider.com/huge-list-o...en-letter-to-ben-bernanke-slamming-qe-2010-11 Again, I don't say that I agree. A large group of prominent economists and thinkers (they're not always the same) disagree with Bernanke. See http://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/


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## andrewf (Mar 1, 2010)

I'm not making any assessment of QE as a policy, just this trite video. It's silly populist propaganda.


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## Larry6417 (Jan 27, 2010)

Actually, I agree with you about the video. Even though I question the rationale and effectiveness of QE, I don't think this video was the best critique.


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## HaroldCrump (Jun 10, 2009)

I liked the video...it was meant to be funny, not a thesis on economics.
Speaking of which, there are so many different opinions even from the experts...each talking head has its own view.
I suppose future generations will look back at this and shake their heads at our silliness and excesses.


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## Lephturn (Aug 31, 2009)

Larry6417 said:


> The prior Fed chairman, Greenspan, argued against rules on futures/options trading and maintained excessively low interest rates, and has only belatedly, and begrudgingly, accepted a modicum of blame


Futures/options were not and are not the problem. In fact the options market seems be by far the most equitable market I trade - more straight-up than the equities markets and leagues ahead of the bond stuff, which is still the wild wild west.

Where Greenspan failed was in regulation of the Credit Default Swaps and Collateralized Debt Obligations. Especially the CDOs are crazy constructed items which were so complex nobody understood them being traded between banks and hedge funds with absolutely no rules or regulations. Now the word "futures" comes into it because the push was for the CFTC http://www.cftc.gov (who are the futures regulator) to regulate the CDO and CDS to try to get some control over these things. Greenspan blocked this, the futures industry wanted it because they were planning to force them to be exchange traded with futures.. which would have been excellent.

For a great handle on what went down read The Big Short. Awesome book and very enlightening.


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## Jungle (Feb 17, 2010)

Thanks for posting funny video!!


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## Larry6417 (Jan 27, 2010)

Lephturn said:


> Futures/options were not and are not the problem. In fact the options market seems be by far the most equitable market I trade - more straight-up than the equities markets and leagues ahead of the bond stuff, which is still the wild west


That's because you trade the listed options market i.e. regulated. The unlisted, unregulated market was where companies got into trouble. See
http://financial-dictionary.thefreedictionary.com/Counterparty+Risk. Also http://en.wikipedia.org/wiki/Derivatives_market


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## Lephturn (Aug 31, 2009)

Larry6417 said:


> That's because you trade the listed options market i.e. regulated. The unlisted, unregulated market was where companies got into trouble. See
> http://financial-dictionary.thefreedictionary.com/Counterparty+Risk. Also http://en.wikipedia.org/wiki/Derivatives_market


Agreed - the "futures and options" mentioned normally refers to the exchange traded markets. The problems were with the "engineered" products (CDOs) and the CDS's written to insure them. Proposing regulations on "futures and options" does not deal with the problem - the CDO's are really complicated multi-tier bonds constructed of other bonds which are collections of mortgages (or sometimes slices of other CDOs), and the CDS's are insurance - neither are futures or options. They are derivatives but not futures or options.

I am of the opinion that the only effective way to regulate these would actually be to regulate the bond rating agencies as they were the key to the whole scheme and the obfuscation of what they were.


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## HaroldCrump (Jun 10, 2009)

Lephturn said:


> regulate the bond rating agencies as they were the key to the whole scheme and the obfuscation of what they were.


In retrospect, it appears that the bond rating agencies didn't understand the complexity of these products, the risks involved, etc. but didn't want to admit it and appear stupid.
So they just went ahead and rated them investment grade.


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## Larry6417 (Jan 27, 2010)

Lephturn said:


> The problems were with the "engineered" products (CDOs) and the CDS's written to insure them. Proposing regulations on "futures and options" does not deal with the problem


At no point did I state or imply that regulating the OTC market would fix the whole "problem." What I did state was that Greenspan was incorrect in opposing regulation - something Greenspan himself has stated. However, I should have used the more generic term "derivatives" because OTC swaps should be regulated as well as OTC futures and options.



Lephturn said:


> I am of the opinion that the only effective way to regulate these would actually be to regulate the bond rating agencies as they were the key to the whole scheme and the obfuscation of what they were.


I respectfully disagree. Improving bond ratings is necessary but insufficient. Improving bond ratings would not, by itself, deal with excessive leverage or moral hazard. If a financial institution is allowed to leverage itself excessively, then even perfect bond ratings won't save it from insolvency in case of a small downturn. Also, if the key people at financial companies believe they'll be saved from their own stupidity, they'll pursue excessively aggressive strategies to enhance their bonuses - to the detriment of the taxpayer.


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## Larry6417 (Jan 27, 2010)

HaroldCrump said:


> In retrospect, it appears that the bond rating agencies didn't understand the complexity of these products, the risks involved, etc. but didn't want to admit it and appear stupid.
> So they just went ahead and rated them investment grade.


I'm a wee bit more cynical than that. Several years ago, the remuneration of bond rating agencies changed. Instead of being paid by investors, ratings agencies started to be paid by issuers. That is, ratings agencies were under enormous financial pressure to give top grades to all income products. I don't believe bond raters are idiots. I believe they were under pressure to give undeserved, high ratings.


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## 72camaross (Apr 26, 2010)

even though I only understood about 30% of that, it was hilarious!


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## andrewf (Mar 1, 2010)

Makes sense, because it was 70% BS!


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## Lephturn (Aug 31, 2009)

Larry6417 said:


> At no point did I state or imply that regulating the OTC market would fix the whole "problem." What I did state was that Greenspan was incorrect in opposing regulation - something Greenspan himself has stated. However, I should have used the more generic term "derivatives" because OTC swaps should be regulated as well as OTC futures and options.


I think we're on the same page now - yes opposing regulation was wrong, and I also agree that regulating all of these OTC products is required. Possibly by forcing them all to be exchange traded and regulated as such?



Larry6417 said:


> I respectfully disagree. Improving bond ratings is necessary but insufficient. Improving bond ratings would not, by itself, deal with excessive leverage or moral hazard. If a financial institution is allowed to leverage itself excessively, then even perfect bond ratings won't save it from insolvency in case of a small downturn. Also, if the key people at financial companies believe they'll be saved from their own stupidity, they'll pursue excessively aggressive strategies to enhance their bonuses - to the detriment of the taxpayer.


Fair enough - "only" was over stating it, I can accept that. The underlying problem you certainly hit on, that those making the decisions are motivated by their compensation to take huge risks and are not penalized when those risks end in losses. One of the key things to regulate are the bond rating agencies and that means changing how they work, and in the case of CDO's might have prevented the problem with those particular products, but the structure of the industry is what ultimately lead to the problem and will lead to future problems in other instruments.

As a side note - is there any good reason to allow CDO's to exist? Why not regulate them out of existence by only allowing "standard" mortgage bonds without all of the tiered structure and complexity that contributed to the problem?

Not like any of this is likely to happen given the level of power and control the large financial firms have in the US Government.


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## Larry6417 (Jan 27, 2010)

There should be some regulation in the OTC derivative market, but I'm not sure what form it should take. One of the reasons the OTC market exists is that institutions want customized offerings. I'm not sure that cookie-cutter, exchange-listed derivatives would suit everyone involved.

Participating institutions in exchange-listed options have to meet minimum capital requirements. Perhaps the same should be expected of OTC participants. In addition, full/enforced dislosure by counterparties may be useful. Obviously, I don't play in this space, so I don't know for sure what's needed. The ultimate "regulation" may be to let foolish companies fail. The financial companies always seem to be ahead of the regulators. If there are deposit holders, they should be compensated within the limits of deposit insurance. Howerver, bond/stock owners and employees should bear the brunt of failure. Over time foolish organizations would fail while prudent organizations would survive. Unfortunately, US politicians are in thrall to Wall Street and wouldn't let this happen.


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