1. The refutation of your Fan and Fred hackjob is right in your words. First, let’s take as given that the Government Sponsored Enterprises ALWAYS had a “public mission” and benefited from/suffered from more government interaction that fully private firms. With that in mind, you say they ran on skinny capital levels, but acknowledge “so did many financials.” You say they lowered underwriting standards, but don’t acknowledge the race to the bottom in Alt-A and subprime by the i-banks, commercial banks and mortage companies. You fault them for aggressively lobbying to protect their position. What large cap company *doesn’t* do this?

9. I don’t follow your logic from “eventually Govt will tire of bottomless bailout” to “inflation of the currency will begin.” Quantitative easing didn’t work in Japan, because the zombie banks still didn’t lend and government spending was misallocated into infrastructure in sparsely populated areas. Sounds like the Obama economic plan.

13. I would like to read a full post on Merkel’s Political Structure views. It could be non-ideological. I am fascinated by the differences between our plurality system (highest % of votes wins) versus, say, French majoritarian system (need to get 50%, usually takes multiple ballots) or the German proportional representation system (all you need is 5% and you get a seat in parliament). They all have implications for how government functions.

I also disagree that we need a government closer to consensus. We need more divided government and less powerful government. You seem to imply that anyway with your “Presidency is too powerful” comment.

I’ve made this point elsewhere, but I think the problem here is that banks can’t charge rates high enough to profitably lend in this environment. The government could get more credit flowing in the real economy, IMO, if it extended lines of credit to non-bank lenders who do charge high enough rates to profitably lend now, e.g., American Microloan, On Deck Capital, etc.

Key point, so can you please explain to this dummy how/why the Fed will be forced to stop sterilizing?

So you are saying the US dollar rally now due to deflation is a headfake and it will be the last shoe to drop in the currency world?

How do you view precious metals then? Thanks, great piece

“How can a bureaucrat with no profit motive figure out whether out whether this is a good decision or not?”

Part of the reason we are in the problem we are in is because of greed on the part of the five big broker dealers. They paid them selves first, generally a good business practice, except they did it to the point that there was no longer a business left to pay them. Unfortunately now there is hardly a world left in which to do business.

In addition a greed motive is often a bad motive when it comes to managing money. In my opinion someone who manages money can do it effectively for a salary just like a plumber can mend pipes effectively on an hourly rate basis. Sure there are good and bad plumbers so I guess you would choose the one that comes with the best references.

As for maximum value I think that since the money is for social security maximum value is less important than maximum safety. Such money could be put to valuable and effective use financing federal or municipal works. Do we question the ability of the federal and municipal bureaucrats understand what needs to be done and how to do it in their communities?

At least they are unlikely to bet the world and lose.