Wednesday, March 16, 2011

Helicopter Drops

Almost a decade after Ben Bernanke gave his speech that pointed out that a determined central bank could almost literally drop money from helicopters in case of threatened deflation, we are seeing the horrifying spectacle of real helicopters dropping water onto pools of water (or what once was watery) designed to cool down spent nuclear rods. This in a technologically sophisticated nation. This in a nuclear complex located directly by the sea.

This whole business of running out of power and running out of water is as disconcerting as finding out that almost all financials institutions were, more or less, bust in September-October 2008, just a couple of months after being reassured by Gentle Ben, Tall Hank et al that what was happening in subprime was staying in subprime. I am a cardiologist. Many of my patients wore tiny, internal lithium-powered pacemakers just under their skin. These devices lasted year after year without a recharge. How can it be that an entire nuclear complex only had back-up battery power that would last only for a fraction of a day?
Who'd of thunk it?

If these rods in the "pond" explode, or if some other catastrophe occurs in this nuclear complex, various stock markets may implode in their own uncontrollable chain reaction. Whether that would be unjustified in the larger scheme would not matter if panic sets in. The "Keynesian" money-printers have gone beyond anything Keynes specifically advocated. Thus we have a financial system that is perhaps even more prone to meltdowns than the troubled nuclear facility in Japan. Nassim Taleb was a lonely voice the past few years calling for the financial system to be "robustified". Instead we got "extend and pretend".

Helicoptered money has not worked to reliquefy the housing market. Let us hope that the real helicopters in Japan, or some other emergency expedients, prevent something that invites direct comparisons to Chernobyl.

In today's and tomorrow's markets, I reiterate my comment from earlier in the week: Safety first.

Copyright (C) Long Lake LLC 2011

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