Rumpole

The Critical Slipping Cog in the Global Financial Machine

When you said: "...What happens is the ratings agencies have just unilaterally relaxed monetary policy by reducing the effective system-wide rrr. Monetary policy has been relaxed quite unbeknownst to the central bank, which thinks monetary policy is unchanged as its interest rates and monetary base targets remain unchanged."

"Unbenownst" is not the word I'd use to describe central banks in this situation. I find it very difficult to believe central bankers were unaware of the effect that private rating agencies were having.

And with the more recent actions of the central banks especially the Fed, are you so sure central banks would do a better job on ratings than the private agencies? Ballooning its balance sheet with so much toxic assets doesn't inspire confidence!

EU Eases Mark-to-Market Rules; What's the U.S. Waiting For?

"...M-T-M, recall, requires companies to mark their financial assets to market each quarter, and run the price changes through their
P&L. For assets that trade on liquid markets, that makes sense. But if the asset is illiquid, or trades in a market that occasionally (like now) freezes up, “market” prices can often be totally unrelated to the asset’s actual intrinsic value. In cases like that, all MTM accounting does is blow up a company’s balance sheet for no reason."
For no reason?? Perhaps the part of the cycle we're now in is saying something about how you're calculating intrinsic value? You're assuming that your version of "intrinsic value" is somehow stable and enduring. But I think that assumption has got to be questioned now that the credit/debt bubble has been popped and the excess cash being pumped into the system is being sucked down the drain of debt and "intrinsic value" is being sucked down that same drain.

In effect, what you're saying is that when times get tough, let's re-write the rules so that we can fudge the books. Who exactly does that help??!!