IT’S been a particularly rough week for Federal Reserve chairman Ben Bernanke when it comes to comparisons. First, he had to endure a hapless US chief investment officer drawing obscure parallels between the Fed warning on the beginning of a global currency war and Hitler warning of the start of World War II (no, The Capitalist doesn’t quite get the connection either).
And before the weekend, a slightly more learned comparison came courtesy of SocGen strategist Dylan Grice, who’s got a bee in his bonnet about asset price inflations. Again, the association is a Germanic one – and to find the parallel, Grice has delved into the history books to revisit the 1920s, when Reichsbank president Rudolf von Havenstein was presiding over the worst period of hyperinflation in Germany’s history, when wheelbarrowfuls of dosh would just about cover a loaf of bread.
“Von Havenstein paused, thought and then added two plus two, to arrive at about … oooh … sixteen million,” Grice wrote in his latest missive. “Noting that currency bestows purchasing power and observing the troubling lack thereof across the country, he diagnosed the problem as being a lack of currency, and concluded that more printing would solve the problem. Today we look back and chuckle at von Havenstein’s naïveté, so staggeringly dense it might have bent light.”
Today, unfortunately, he reckons the (lack of) thinking hasn’t changed, though the circumstances are somewhat different.
“Bernanke and his co-believers are equally oblivious to their contemporary equivalent: asset market inflations. From emerging markets to precious metals to agriculture, it’s like déjà vu all over again. Nascent bubbles are emerging. But to what Havensteinian conclusion does the warped logic of our central bankers lead them? Why, the world needs more liquidity, of course…”
Knowing the importance of image in the upper echelons of the banking world, The Capitalist imagines that JP Morgan chief executive Jamie Dimon and former Merrill Lynch boss John Thain are relatively chuffed with the actors chosen to play them in the upcoming movie of Andrew Ross Sorkin’s best-selling Too Big to Fail.
Dimon will be played by Bill Pullman, best known for playing a go-getting US President in Independence Day. And Thain hasn’t lost out in the macho stakes, either – he’ll be portrayed by Matthew Modine, star of war flick Full Metal Jacket. Other names already confirmed for the film include William Hurt as US Treasury secretary Henry Paulson, Paul Giamatti as Ben Bernanke, and Tony Shalhoub as Morgan Stanley’s John Mack.