AIR DATE: March 13, 2023
Courtesy: RFD TV…(read more)

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This Price Action is Wrong Thanks to Bank Bailouts

The concept of a fair and just economic system seems to be slipping away with each passing day. The repercussions of the 2008 financial crisis are still haunting us, and one of the bitter truths that we have to accept is that the price action we witness in the markets today is largely a result of the bank bailouts that took place during that time.

In the aftermath of the crisis, several major banks were on the verge of collapse. To avoid a complete meltdown of the financial system, governments worldwide stepped in to bail out these banks using taxpayers’ money. While the intention behind these bailouts was to stabilize the economy, the consequences have been far from desirable.

One of the major problems with bank bailouts is the moral hazard they create. By bailing out these banks, governments send a message to the financial institutions that they are too big to fail and will be rescued in times of crisis. This incentivizes risky behavior and creates a sense of moral impunity within the banking sector. Essentially, it allows banks to engage in reckless actions without fear of facing the full consequences.

Fast forward to the present day, and we can see the direct influence of these bank bailouts on the behavior and price action in the markets. Banks and financial institutions continue to take highly speculative and risky positions, relying on the expectation that they can count on government intervention if things go south. This creates a distorted market environment where risk-taking is incentivized, leading to artificial price movements and misallocation of resources.

Furthermore, the bailouts have exacerbated income inequality. While ordinary citizens continue to bear the brunt of economic hardships, banks and their executives thrive. The financial institutions that were deemed “too big to fail” were saved with taxpayers’ money, while ordinary individuals who had nothing to do with the crisis had to suffer the consequences. This unjust distribution of burdens further erodes trust in the system and widens the gap between the haves and have-nots.

So, what is the solution? It’s clear that the current approach of bailing out banks and maintaining the status quo is flawed. We need to move towards a more responsible and fair system. This could involve stricter regulations for banks and financial institutions, breaking up institutions that are “too big to fail,” and ensuring that executives are held accountable for their actions.

Additionally, governments should focus on supporting and bailing out the real economy rather than bailing out banks. It is the small businesses and individuals who are the backbone of the economy, and they deserve more support and protection during times of crisis.

In conclusion, the price action we see in the markets today is a direct consequence of the bank bailouts. It has created a distorted and unfair economic system, where risk-taking is incentivized and income inequality is exacerbated. Moving forward, we must demand a more responsible and just approach to prevent history from repeating itself.