There has been a lot of discussion lately on whether, by moving too aggressively in shoring-up the market, the latest actions by the Federal Reserve constitute a “moral hazard” which inadvertently conveys to market participants a false sense of security and even impunity leading, ultimately, to inefficient behavior and careless risk taking.
Yet, given the policies of the Fed in recent times, it’s seems hard to differentiate the measures taken by “helicopter” Ben from the former “easy money” maestro in order to determine which era might be deemed hazard causing and which not.
I suppose the best way to judge is simply to watch the sentiment and actions of the market participants themselves to see if they appear to be relying on presumed assurances from a higher power when making their market bets.
To that end, witness this ridiculous clip of CNBC’s Dylan Ratigan closing the NASDAQ yesterday and see if you can divine the answer for yourself.
It’s subtle so I’ll give you a hint… the part towards the end of the clip where, surrounded by a large cadre of Wall Street goons, Ratigan, in a crescendo building cheerleading tone, states “Five days in a row… this markets been higher. You can thank the Federal Reserve for that. Ever since they stepped in this market has been [up up and?] away.”
So I guess the hazard is on, where it ends only time will tell but let’s just hope that it’s not with Bernanke hurling sacks of cash from the General Lee.
Possibly the old TV serial lyric holds a clue:
“Straightening the curves, flattening the hills
Well someday the mountain might get 'em but the law never will
Just two good ol' boys, wouldn't change if they could
They're fighting the system like two modern-day Robin Hoods”
Oh well… it’s just the economy…. By the way, I’m the spitting image of Cooter.
