Tuesday, June 16, 2009

Tuesday Late Night

Home late from a work related function, but some links are in order.

More Bearer Bond News
Oh boy, now the Italians want the SEC to make a ruling on the bonds authenticity. Market Skeptics has the goods.

Krugman Is, and Always was a Keynesian Clown
Mish delivers the knockout blow with this story. Dead to rights line from Krugman himself in August 2002:
The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Game over. The housing bubble was both done on purpose and finally exposes Keynesian economics for what it is: Useless and Dangerous

Other Stuff
A good friend of Economic Disconnect has plenty of content up tonight, so why not check out Illusion of Prosperity?

Another new stop for me is Accrued Interest.

And of course, if you have not checked out The Automatic Earth, well, you are really missing out.

Have a good night.

11 comments:

getyourselfconnected said...

Added two pictures to the blog from the new Star Wars story line from:
http://starwars.wikia.com/wiki/Sacking_of_Coruscant

One near blogroll, the other at very bottom of page. Very awesome.

GawainsGhost said...

Well, there were many factors involved in blowing up the housing bubble, going back decades and over several administrations.

Deregulation, which incidentally actually began under Carter and continued apace under Reagan, Bush I, Clinton, and Bush II, played a major part. The repeal of Glass-Steagall though was probably the most important. That and the failure to regulate the securities market, particularly credit default swaps (weapons of mass financial destruction, can you spell AIG?), contributed mightily.

Then there was this mad rush, born of the tech bubble, to computerized risk modelling, which infected Wall Street like a malignant cancer. Warren Buffett said, "Beware of geeks bearing formulas." But no one paid any attention to him.

And let's not discount infectious greed on the part of home buyers. I first got into real estate seven years ago, right when the bubble was beginning to inflate. And, I have to tell you, it was insane!

Blame the media for shows like Flip This House and the like. Suddenly everyone thought they were an expert in real estate after watching some stupid television show.

I remember once I got off work and stopped by my favorite watering hole for a drink before heading home, and this guy I went to school with comes up and wants to talk about real estate. He's a doctor now, and apparently his practice isn't generating the money he thought it would, so now he wants to get into flipping houses.

I asked him flat out, how much capital do you have? Seriously. You're talking about buying a house, fixing it up and selling it for a profit. Do you have any idea what all is involved in that? Unless you have a ton of cash up front, you're going to have to finance the purchase. That means principal and interest payments, not to mention taxes. Then there's maintenance and rennovation costs, assuming you know a good contractor who knows how to repair and upgrade a house. You're not thinking of doing all the painting, not to mention repairing holes in the sheet rock, installing new carpet, fixing electrical and plumbing problems, and upgrading the kitchen and baths by yourself, are you?

Even after you accomplish all that, how are you going to sell the house? By putting a FSBO (For Sale By Owner) sign in the front yard? That'll work. How much are you willing to spend on marketing and advertising? If you go through a Realtor, who will assume those costs, you're talking about a 6% listing and selling commission.

So, add it all up. Principal, interest, taxes, maintenance, repairs, rennovation, Realtor's fees, closing costs. We're talking about serious money here. And how long do you think it will take to sell this house? Average time on market is about six months. Do you have the capital to weather that storm?

At the end of the day, you're looking at a whole hell of a lot of work, money and time, to make about $500. Which is a lot of money, I know, but that shut him up.

Anyway, you're right, GYC, Greenspan did have a lot to do with inflating this bubble and causing this financial crisis, by keeping interest rates way too low for far too long. There's even a blog, The Mess That Greenspan Made, that focuses on this topic. And as we all know, Mish has been relentless in his pursuit of blame, as has Barry Ritholtz at The Big Picture.

Deregulation, securities, infectious greed, stupidity, the Fed, all had their hand in this debacle. But for my money, the overwhelming cause was the prevalence of fraud. Lending fraud, appraisal fraud, brokerage fraud, I mean, it just got out of hand.

And let's not forget the government's role in all this. The CRA, forcing banks to make loans to creditless people, looking the other way at accounting fraud at Fannie and Freddie. The whole thing is a mess.

Whatever happened to America? I'll tell you. The greatest generational theft in the history of the world and the complete destruction of the middle class.

I am sad and sick at heart. Sorry for wasting your bandwidth, but this is something that really pisses me off.

Anonymous said...

June 17 (Bloomberg) -- President Barack Obama said the financial regulations he’s announcing today are intended to prevent the abuses and recklessness at the root of the economic crisis while letting free markets thrive.

“I have always been a strong believer in the power of the free market,” Obama says in remarks prepared for delivery at the White House this afternoon. “We seek to put in place rules that will allow our markets to promote innovation while discouraging abuse.”
http://tinyurl.com/l8l4g4

My bullshit meter just blew apart.

I had to go over to:
http://www.whitehouse.gov/contact/
And congratulate them that doesn't happen that often, they peg pretty often but this just blew that thing apart.
Kevin

Stagflationary Mark said...

Kevin,

"My bullshit meter just blew apart."

You crack me up! Hahaha!

I broke mine during Bush's term and never bothered to get it fixed. To be fair, it would have blown apart in the 1970s had I been old enough to understand its many gauges and dials, lol.

Stagflationary Mark said...

GawainsGhost,

"I am sad and sick at heart. Sorry for wasting your bandwidth, but this is something that really pisses me off."

This IS our bandwidth.

When I write in my blog, I do so as a patient seeking extremely cheap therapy from the readers. All I'm really doing is venting my frustrations.

Anonymous said...

Mark,

I think there is a bull market in bullshit meters.

Kevin

Stagflationary Mark said...

Kevin,

That makes sense.

There's also a bullshit market in bull meters.

Psstttt... There's no internal wiring. It's just a "Buy" sticker affixed to the display of the empty shell, lol.

July 24, 2007

http://online.barrons.com/article/SB118522490162275395.html?mod=googlenews_barrons

"Despite the criticism President Bush has received over his Iraq War policies, isn't it interesting that stock markets have been booming since early 2003, when Saddam was overthrown and the president signed his supply-side tax cuts into law?" writes the erstwhile Wall Street economist and Reagan Administration budget official and current CNBC host."

Anonymous said...

Mark,

There's also a bullshit market in bull meters.

LOL yes indeed, You know how they say a bull market climbs a wall of worry? The worry always is they are gonna run out of suckers

Kevin

Anonymous said...

WASHINGTON, June 17 (Reuters) - Market participants should clearly get the message that large financial institutions "can and will fail" under the Obama administration's regulatory reform proposal, top bank regulator Sheila Bair said on Wednesday
http://tinyurl.com/lljvzs

Being that all that "fail" means in this country is being taken over and becoming part of the US government and "to big" means very politically connected this may be trouble but only if they can't figure out how to let them cook the books to hide their insolvency but this is a special group only reserved for banks. So Watch out.

Kevin

watchtower said...

I'm digging the new Star Wars pictures.

I'm having trouble finding "Senkos" locally but not to fear, the family and I are going to the big city this weekend and I'm planning a stop at the "Bass Pro Shop".
I might have to go long fishing equipment and reloading supplies : )

That's of course if I can find any reloading supplies for sale, here lately I have never seen anything like it since I started shooting 16 years ago, as soon as it hits the shelves it's gone.
Bubble perhaps.

Anonymous said...

Nearly 60% Won't Graduate At South Side School
44 Of 77 Students At Bradwell Elementary Did Not Pass Eighth Grade
http://tinyurl.com/lqgkvo

Obviously this is an example of not to big to fail. It also highlight the utter disgrace of the education system in this country which is also part of the government and has a very large work force.

Kevin