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Five Things: United States of Adequateness


A nation's obsession with achieving adequateness is finally paying off.

1) United States of Adequateness

'"Is it rational for us to say all institutions should be well-capitalized both in the good times and in the bad times? Or are there ways for us to say in more distressed times like what we're facing right now, maybe it's OK to be adequately capitalized?"
- Acting Director of the Office of Thrift Supervision, Scott Polakoff, speaking during U.S. House Financial Services Committee hearing on Wednesday

After a mammoth 7 percent rally in the stock market on Monday that left even hellfire and brimstone end-of-days preachers feeling bullish, it's only natural for things to settle down a bit. Even veterans of The Street suddenly found themselves feeling a bit squeamish on Wednesday morning, much like middle-aged men caught jumping on a trampoline by their next door neighbor when they thought no one was looking.

It's true, the stock market is up nearly 20 percent over the past two weeks or so; which is the kind of move that goads even staid business executives into impulsive daydreams about the killing and butchering of animals. But, as has been the case for what is going on two years now, it only takes one slip to put the kibosh on the whole thing. Those in on the grift call it batting out of turn.

2) Batting Out of Turn

Today, Scott Polakoff batted out of turn.

Polakoff is the Acting Director of the Office of Thrift Supervision, the OTS. The OTS is an agency of the Treasury Department responsible for regulating federal thrifts and savings and loan companies.

And so it was Polakoff who went before the House Financial Services Committee with the deranged idea that the financial institutions it regulates should be well capitalized only during boom times. During busts it's apparently OK to walk around like everyone else wondering what in the hell happened to your job and where your next meal is going to come from.

Indeed. This is the kind of thing that passes for logic here in the United States of Adequateness during The Age of Self-Evidence.

3) Meet You at the OTB!

If you are queasy right now it's either because you haven't spent enough time in filthy Off Track Betting parlors, or because you've spent far too much time in filthy Off Track Betting parlors. Because, as someone who can lay claim to the latter, take it from me: that is precisely the train of thought going through the head of every steady bad lucker in the joint... just before the last race.

Financial institutions should only be well-capitalized during boom times. At the track, no one bothers to question that kind of desperate reasoning. Similarly, we have arrived at the point where the acting director of the OTS, the regulatory body governing financial institutions that theoretically safeguard the life savings of millions, can adopt that line of reasoning without anyone on the House Financial Services Committee so much as batting an eye.

4) Zimbabwe: Inflation Dead?

Here's a little nugget that some may have missed. Prices in Zimbabwe have begun to fall, declining by nearly 3% for two consecutive months.

Of course, that's what happens when no one will accept your dollars anymore. But how bad must deflation be when even the rate of inflation in Zimbabwe is declining?

5) When Money Dies!

Speaking of Zimbabwe, let me share a brief story that will help illustrate my own views on hyperinflation.

About six or seven years ago I bought an out-of-print book through an online used bookseller, Adam Fergusson's "When Money Dies: the nightmare of the Weimar collapse."

Recently, I advertised the book for sale on Amazon because there is growing concern about hyperinflation and, frankly, I don't want it anymore. Looking online for a range for the book so I could price it, I noticed there are apparently no copies of the book available anywhere. So I posted it for the maximum Amazon price, $2,500. And this is where things turned weird.

A potential buyer emailed me a few weeks ago and asked if I would call him because he has a question about the book. Why not? This was our conversation:

KD: Hi, you wanted to ask a question about the book?

Potential Buyer: Yes, I was just wondering if we could talk about the price?

KD: What do you mean?

Potential Buyer: Are you willing to come down on the price?

KD: Are you interested in the book because you are concerned hyperinflation is a threat here in the U.S.?

Potential Buyer: Well, yeah, I am, but I was just curious if the price was at all flexible.

KD: Uh, let me see if I understand this; you are worried about hyperinflation, but trying to negotiate the price of this book down?

Potential Buyer: $2,500 is a bit much.

KD: If I were you I would check back in a month. If the price is higher, buy it immediately. If it goes down, rest easy and stop worrying about hyperinflation.

In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to affect positive change in the lives of children.
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