"Let them eat cake" is the phrase usually (and probably mistakenly) attributed to Marie Antoinette, referring to the starving non-manicured classes beyond the Versailles hedgerows.
The bunny would add his own version, updated for the present: Let Them Go Broke.
The current Fed helmsman Ben Bernanke is caught up in history, much like newlyweds who buy a home and commence to renovate it only to find that the plumbing is shot, the foundation is skewed and the whole place is haunted by the ghosts of a Waffen SS unit.
Oh, how fickle humans are, chortles the bunny to himself. Life truly is show business--you're only as hot as your last hit. For those without subscriptions, the bunny offers this tasty summation by Alan Abelson in the 8/13 issue of Barron's (p.7):
"Mr. Greenspan, lest we forget, went far beyond the call to entice people, no matter what their circumstances, into buying a home by whacking the cost of credit to as near zero as you can get and still lay claim to being somewhat rational, and urging them to go for those new-fangled adjustable mortgages with deceptively low initial interest rates...As his successor, gentle Ben Bernanke, is no doubt becoming ruefully aware, creating a mess is easy. The trick is in knowing when to slip out, leaving someone else with the job of cleaning it up. And here Mr. G. has proved himself an undisputed master."
Such adroit verbal fencing tickles the bunny's fancy. After all, it's no secret that the current round of bloodletting is due to past Fed policy of cheap money--something the bunny has railed against with abandon in blogs past. Low rates and easy credit a bubble did make. Bursting it is! (For no apparent reason, the bunny channeled Yoda for a moment. Chalk it up to cable TV.) But, ever a keen student of history, the bunny knows this (and the consequent round of chapter 11 filings) is the corrective mechanism of markets at work. Bring on the leeches.
Oh, but if only they would. Instead, the Fed injected billions into the system to keep its glands moist, which smacks of (yeechh!) bailout. But even beyond pleas for cash, the ambient noise machine is now droning for a rate cut--which would only make matters worse. Hedge funds, mortgage lenders and other assorted bottomfeeders who sculpted this steaming bolus would merely go back to their sordid practices, driving us past the ridiculous right into what Mel Brooks in Spaceballs termed simply "Plaid". A rate cut (which Mr. Bernanke, to his credit, has steadfastly resisted, a practice which has probably gotten him crossed off the A-list of every top-tier party circuit from East Hampton to Grand Cayman) is wrong on every level, not least of which is the message it sends to the wrongdoers. It raises what Louis Uchitelle called "'moral hazard'--meaning that the risk-takers who brought on this panic would feel bailed out and likely to do it again" ("Opinions Are Plentiful, as Bernanke Faces His First Crisis", New York Times p. C1, 8/11/07). The logic is simple. If you went away for the weekend and your child turned your bathroom into a meth lab, would you buy him an iPhone? Let the corrective mechanism work--if a thousand hedge funds (of the nine thousand or so which have rather suddenly sprung up in recent years) go under, risk is removed and markets will stabilize. The bad seeds will be purged to make room for a healthier crop. Wall Street works best striving for homeostasis, it is intestinal. Overreaching, running too hot, too much oily spicy food and what have you got?
Bankruptcy, not bailouts, is the markets' Maalox, greedy bipeds, cautions the bunny. Listen to the bailout brayers do not. Let them eat cake--if you stick with timothy hay, the Great Bowel will smile upon you.
