The plan of the big US money centre banksto set up a fund to buy mortgage-backedsecurities from hedge funds and bank conduitsaims to relieve the log jam in credit markets.But it is also a scam to get the banks out of amess of their own creation. It might work and free up credit markets.But it won’t reverse the contraction of globalliquidity and the rising cost of capital in thelonger term. We are set for slower liquiditygrowth, providing little room for further assetprice inflation (whether in equities, emergingmarkets or commodities).“Put more than one capitalist in a room andwhat you get is not competition, but conspiracyto defraud the public” – to paraphrase AdamSmith. The latest attempt by the world’s megabanks is a neat example of such a situation.The very villains who created the mess havenow turned...
