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Friday, January 18, 2008

There's No Crying in Capitalism

"Capitalism is optimism monetized" - Dennis Kneale
Items of interest:

Paul KrugmanPaul Krugman / NY Times:
Don’t Cry for Me, America -- Mexico. Brazil. Argentina. Mexico, again. Thailand. Indonesia. Argentina, again.

And now, the United States.

The story has played itself out time and time again over the past 30 years.[...]

The global origins of our current mess were actually laid out by none other than Ben Bernanke, in an influential speech he gave early in 2005, before he was named chairman of the Federal Reserve. Mr. Bernanke asked a good question: “Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets — rather than lending, as would seem more natural?”

His answer was that the main explanation lay not here in America, but abroad. In particular, third world economies, which had been investor favorites for much of the 1990s, were shaken by a series of financial crises beginning in 1997. As a result, they abruptly switched from being destinations for capital to sources of capital, as their governments began accumulating huge precautionary hoards of overseas assets.

The result, said Mr. Bernanke, was a “global saving glut”: lots of money, all dressed up with nowhere to go.

In the end, most of that money went to the United States. Why? Because, said Mr. Bernanke, of the “depth and sophistication of the country’s financial markets.”

All of this was right, except for one thing: U.S. financial markets, it turns out, were characterized less by sophistication than by sophistry, which my dictionary defines as “a deliberately invalid argument displaying ingenuity in reasoning in the hope of deceiving someone.” [...]
NY Times:
Sorting Out the New Housing Market -- The shape of the new American housing market — the post-bubble market — is starting to emerge. It is one that favors the young who never owned a house and the banks that have access to cheap deposits. It may be harshest on the two coasts, where both distress and a newfound lack of mobility may be on the increase.

The ideal home buyer now — in a reverse of what was true for years — is a renter who is not burdened with a house. Such a buyer will need a down payment from somewhere, and he or she will need enough income to meet the monthly payments for the foreseeable future...

But not owning a home, which may be hard to sell, is a big plus.

A year ago, having a home that had appreciated in value meant that an owner could trade up to a more expensive home. Now it means that the homeowner cannot move until the old home is sold, and that is getting more difficult. First, the seller has to find a buyer who can get a mortgage. Second, the price has to be high enough to pay off the old mortgage and leave enough cash for the down payment on a new home. Both were taken for granted a year ago. In many markets, neither is a sure thing now. That has created a daisy chain of delays and cancellations that has frustrated builders, homeowners and real estate agents. Selling one house depends on the buyer’s selling another house, and that deal in turn depends on yet another sale, and so on and so on...
Why Stock Market's Selloff Is Likely to Continue -- Forget rate cuts and stimulus packages. In Wall Street's eyes, the recession is already here and the credit crunch is far from over.

This month's huge selloff in the stock market reflects the double-whammy being felt by investors: shrinking economic growth and continued uncertainty over the extent of the subprime mortgage mess. [...]
A Cheap shot

Green Bay Pulls 'Seinfeld' Ahead of Sunday's Big Game -- A Fox affiliate in Green Bay, Wis., home to the Green Bay Packers, has said "No Seinfeld for you" to New York Giants quarterback Eli Manning, who is a big fan of the show. He's in football-crazy, cheese-head Wisconsin, preparing for the NFC championship game against the Packers Sunday night and a chance to make it to the Super Bowl.

In a video on the affiliate's Web site, General Manager Jay Zollar points at the camera and says, "Eli, no Seinfeld for you!"

The station pulled its regularly scheduled 5:30 p.m. Saturday rerun of the syndicated comedy in an effort to throw off Manning's preparation for the big game. [...]

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia