Slapped by that invisible hand

Economist Adam Smith argued in his book “The Wealth of Nations” in 1776 that the global economy was best left to “free markets” and “the invisible hand” where all individuals pursued their own self-interest un-hobbled by too much government intervention.

“The latest machinations of the Central Banks will have Adam Smith rolling over in his grave. No “invisible hand” for them. Rather they are acting out in the open, making it clear they may be prepared to buy up as much of the financial world’s malinvestments as necessary to preserve the current world order, and don’t mind if they stick taxpayers around the globe with the bill.” [Market Oracle]

Six out of every 10 Orange County homeowners who bought a home in 2006 are “upside down” on their mortgages, meaning that they owe more for their home than it was worth in the fourth quarter of 2007, according to home-value estimator” [OCRegister]

“The problem was that MBIA and Ambac insured a ton of bad mortgage debt during the housing bubble. They were like butchers who packaged rotten meat as gourmet cuts. By the end of 2007, things had begun to stink so badly that the two companies were in serious trouble. Since the beginning of 2007, MBIA had lost over 80% of its market value. The company had less than $6 billion in cash and was sitting on over $17 billion in debt. It had cut its dividend and needed $2 billion in capital just to stay in business.

“Yet, in spite of all these problems, the credit rating agencies stated that MBIA was a “AAA” business: as safe to buy as Warren Buffett’s Berkshire Hathaway or General Electric. They were lying.” [Ambac, MBIA Finally Get the Rating They Deserve]

Yes, large global U.S. corporations are sitting on a cash horde of $1.4 trillion or so; and that begs the question: what are they waiting for? Isn’t there any capital project profitable enough to justify investment? Apparently not. If you’re counting on global U.S. based corporations to “save the country” via wise investments in new goods and services, don’t hold your breath. Many companies have “invested” their billions of cash in share buybacks, essentially propping up their stock prices with artificial demand/ buying.” [Charles Hugh Smith, Of Two Minds]

WTF is “the invisible hand ?”


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