Long term recovery or Long term trouble?

The Financial Accounting Standards Board voted to allow companies to price assets at what they would sell for at an “orderly” sale, as opposed to the lower values of a forced sale. This announcement, in addition to Fed’s decision to buy up $1T treasurys, sent DOW to 7500 then over 8000.

While the Market has enjoyed rallies by these policy changes and claimed that the financial markets have been stable. The next step would be heading to a recovery. However, they cultivate seeds for long term trouble.

For $1T treasurys, inflation (after bursting deflation problem) can be seen. On the other hand, the FASB rule change, according to two members, was passed by the pressure from the government and congress. This rule is a complete confliction to whatever the government has proposed tightened regulation. The “orderly” sale would give banks more power to log their balance sheets, even arbitrarily.

That is bad as investors don’t know what the banks are doing. What is the difference between risky gambling on sub-prime mortgages and the banks’ making up numbers? From these two rule changes, the government has run out of ways except policy changes.

That is also dangerous as no one knows what politicians would do at their political will. So be cautious.