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May 14, 2012

So, I had originally decided not to comment on the JP Morgan fiscal fiasco, wherein they lost $2 billion last quarter. But I couldn’t help but make one quick comment. This should not be a surprise. J.P. and the other large Wall Street firms were prevented from learning a lesson from their 2008 excesses —they failed to learn the lesson they should have learned:  when you gamble there is a reasonable chance you might make the wrong bet. It is the result of what is referred to as the moral hazard of bailing out stupid and risky behavior. When one does stupid and risky things, one should suffer the consequences of their stupid and risky behavior. Since 2008, we no longer have moral hazards. Instead we have “stop-loss insurance” provided by your tax dollars, for too-big-to-fail banks.

Lessoned learned: we have created the worst of moral hazards and certainly there is more of this to come!


Ten year U.S. Treasury bond at all time low of 1.79 percent. The below chart shows the 10 year bond since 1950. Are bonds at these rates reflecting just how low expectations are for inflation? No, they reflect our central banks frenzied manipulation.


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