Let me show you the way: http://www.youtube.com/watch?v=cwtqf0RRWNY&feature=related

The common stock, we put the poles in the holes: http://www.youtube.com/watch?v=whc60qlD5MU&feature=related

Ipso facto I can’t get no: http://www.youtube.com/watch?v=eZXEVVX-RAw&feature=related

Which makes me a Mongoloid: http://www.youtube.com/watch?v=ZWmf7r_37eA&feature=related

Which make me want to twist away the gates of steel: http://www.youtube.com/watch?v=qz8QPL8_hLg&feature=related

That leaves me with an: http://www.youtube.com/watch?v=ZRENoPisFYk&feature=related

Well DownSouth how are the altruistic to fight the A’s of the world really..Good intentions?

Bob you asked me a question one time concerning size of the prophet. Well what ever he had was chopped off even before he was born via the immaculate conception…eh…their is your nihilist novelette.

Skippy…the dada bob, better than killing hay.

Seriously, to suggest you can “correctly identify the causes” and ignore the rest of this is incredibly arrogant. Geithner himself had pretty good a priori analysis of the impacts of petrodollar/Chinese trade flow recycling and its potential dangers.

I happen to think currency recycling was a really big deal, in concert with a poor rate of return on investment in America(heavily distorted towards residential housing and in competition with a severely overdeveloped China), as well as maturity mismatches and leverage.

But you brush two thirds of those away with a snort and focus entirely on… the domestic banking system.

Heh.

I’m proud other commenters caught on to the omission of all that. I’m deeply bemused that you and Dudley didn’t.

The mere existence of analysis like this is fascinating, in a meta- kinda way. I also find dadaism fascinating.

Am I the only one (besides Siggy) to see the humor in this from the man who was Goldman’s chief economist while all this was going on? Or how laying off the exotic instruments and de-regulation is a way to direct attention away from Goldman and Dudley’s role in the crash?

DownSouth pretty much nails it. All of this seems like going the long way round to say there was a bubble and surprise, it burst. But why this is the shadow banking system’s fault and not the bubble makers is unclear to me. Rather like saying so we had access to all this money so of course we had to go out and blow it on something really stupid.

And you just got to love his recursive logic in:

“The uncertainty stemmed, in part, from the lack of transparency about what prices these assets could be sold for, which, in turn stemmed from the difficulty of valuing these extremely complex and heterogeneous securities.”

Skippy…what a sweet game, no liability affixed to the actual goods all along the path to sale and after, just the skimming goodness planet wide. The Fed is a scam.

Yes, Marlow himself would no doubt find a metaphoric resonance in the methods of the Company of the 1890s Congo Ivory trade and the no-less violent (albeit less bloody) financial trade of our day. I see Mr. Dudley as a well-meaning strategist at Company headquarters, abstractly analyzing the body count and the methods employed by the trade to accomplish its business objectives, and lecturing an assembly of ivory trade senior management, in a genial and genteel way, on ways to reduce the collateral damage and gain efficiencies in the process — in short to improve “the method”.

Kurtz himself, of course, is too high a bar for our time. None of the psychopaths who’ve been tossed onto our mind-screens by the GFC would seem to be even remotely capable of grasping Mr. Kurtz’s deeply existential and almost eschatological view of homo natura, or his capacity for trenchent metaphor. This might be something done to consciousness by the immersion through work in fleshless abstractions — such as “money” — instead of things that tap a sort of primal kinesthetic sensibility, like digging ivory and bringing it a thousand miles through a hot hell.

Our proto-Kurtzes would be playing golf somewhere, or tanning themselves before getting a massage. Perhaps this is a form of progress, for which we should be grateful. Althought I’m inclined to think it’s merely a brief epiphenomenon of our enlightened “civilization”, which may be rendered as a form of nostalgia if this madness is unrestrained and runs its natural course.

* * *

But there is no disguising the fact, Mr. Kurtz has done more harm than good to the Company. He did not see the time was not ripe for vigorous action. Cautiously, cautiously — that’s my principle. We must be cautious yet. The district is closed to us for a time. Deplorable! Upon the whole, the trade will suffer. I don’t deny there is a remarkable quantity of ivory — mostly fossil. We must save it, at all events — but look how precarious the position is — and why? Because the method is unsound.’

‘Do you,’ said I, looking at the shore, ‘call it “unsound method?”

‘ ‘Without doubt,’ he exclaimed hotly. ‘Don’t you?’ . . .

‘No method at all,’ I murmured after a while.”

-Joseph Conrad, Heart of Darkness

Interestingly, those few banks who had ever worried in the past about Liquidity seemed to give up on that around the early 1990s. Adopting a ‘Liquidity Strategy’ (which in turn leads to a ‘Liquidity Plan’ and a ‘Liquidity Crisis plan’ and should incorporate pricing and credit for use and creation of liquidity) became a thing of the past. Anyone telling a bank that they needed these things in the later 1990s or 2000s was, fomr what I could see, treated with total lack of interest and shown the door. However, the few banks who (to my knowledge) had done that even in the early 1990s did somehow do better all these years later than the banks that had never worried about Liquidity in the first place. Even now, I don’t hear of banks doing much about their Liquidity profile (except in the UK, and then only in response to the FSA’s recent demands –and I am not sure that too much is being done even by then).

If there is a full economic recovery, and no ‘double dip’ big bang disaster over the next few years, then I predict that Liquidity will gradually disappear as a concern, and institutional memories will again disappear, and then there will be another disaster, in another 40 years’ time, when people have learnt to stop worrying about Liquidity. . . . .

How is this possible as an explanation?

The crisis was caused by a rapid inflation of asset “pricing” that was not supported by the asset “value”.

Everything else is simply an explanation of how the mechanism that allowed that to happen failed.