Imagine that your fortunes have been on the decline for some time and that your rich uncle, who had been bailing you out of every hubris induced mess that you had gotten yourself into, looks like even his patience and power is running thin. Now imagine that, owing to your previous misdeeds, a populist sheriff is promising to catch-up to you and make you a public spectacle.
Now imagine that yesterday the Sheriff himself was busted and that today your rich uncle stepped in with another bag of loot and convinced his rich friends also to pony-up and underwrite your misadventures. I would say it is time to celebrate.
Spitzer is going down for the trivial crime of having visited a bordello. Whether he goes all the way down is not important. His ability to vault his career off the back of a populist campaign against the banks for their sub-prime crimes is all but stymied. And today the Fed showed up with an additional 200 billion of Liquidity/Equity.
I have now lost track of all the direct and indirect forms of Liquidity/Equity the fed and other CBs have pumped into the financial markets and all the dubious forms of asset classes they have been willing to accept.
But someone needs to ask their professor of economics how all this fits into orthodox price, risk and agency theory.
If your prof is a New Keynesian he or she will perhaps just smile. If not expect a bad grade. And then you too will start to complete the Devil Shift.
But will that be because of your bias or their power?