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Monday, December 1, 2008

The Crash of '08 Roundup — December 1, 2008

Items of Interest:

U.S. Stocks Drop, Ending 5-Day Rally; GE, JPMorgan Shares Fall -- U.S. stocks slid the most since October, wiping out more than half of last week’s rally, on growing concern the global economic slump is deepening and consumers’ access to credit is shrinking...

Recession in U.S. Started in December 2007, NBER Says -- The U.S. economy entered a recession a year ago this month, the panel that dates American business expansions said today.

The declaration was made by the cycle-dating committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts. The last time the U.S. was in a recession was from March through November 2001, according to NBER...
AP / San Jose Mercury News:
Bush: 'I'm sorry' the economic crisis is occurring -- "I'm sorry it's happening, of course," Bush said in a wide-ranging interview with ABC's "World News," which was airing Monday. "Obviously I don't like the idea of people losing jobs, or being worried about their 401(k)s. On the other hand, the American people got to know that we will safeguard the system. I mean, we're in. And if we need to be in more, we will." ...

Chris Isidore / CNNMoney.com:
It's official: Recession since Dec. '07 — The National Bureau of Economic Research declares what most Americans already knew: the downturn has been going
on for some time…
Michael M. Grynbaum / New York Times:
Recession Is Official; Stocks Take a Fall Rex Nutting / MarketWatch:
George F. Will / Washington Post:
Same Old New Deal? — Early in what became the Great Depression, John Maynard Keynes was asked if anything similar had ever happened. “Yes,” he replied, “it was called the Dark Ages, and it lasted 400 years.” It did take 25 years, until November 1954, for the Dow to return to the peak it reached in September 1929. So caution is sensible concerning calls for a new New Deal...

FDR's hyperkinetic New Deal created uncertainties that paralyzed private-sector decision making. Which sounds familiar...

Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s...

Here we go again? A new New Deal would vindicate pessimists who say that history is not one damn thing after another, it is the same damn thing over and over.
Helen Thomas / Seattle Post-Intelligencer:
It's a depression -- Few prominent economists will say it, but to me it looks and feels like we are in another Great Depression or a reasonable facsimile...
Paul Krugman / New York Times:
Deficits and the Future — Right now there's intense debate about how aggressive the United States government should be in its attempts to turn the economy around. Many economists, myself included, are calling for a very large fiscal expansion to keep the economy
from going into free fall...
Wall Street Journal:
America's Other Auto Industry — There is such a thing as a profitable car maker in this country. — The men from Detroit will jet into Washington tomorrow — presumably going commercial this time — to make another pitch for a taxpayer rescue. Meanwhile, in the other American auto industry …
Andrew Higgins / Wall Street Journal:
How to Combat a Banking Crisis: First, Round Up the Pessimists — Latvian Agents Detain a Gloomy Economist; ‘It Is a Form of Deterrence’ — RIGA, Latvia — Hammered by economic woe, this former Soviet republic recently took a novel step to contain the crisis. Its counterespionage agency busted an economist for being too downbeat...
Meredith Whitney / FT:
America Must Keep Consumer Liquidity Flowing -- As an analyst, it is my job to do fundamental research and call it as I see it, and my bailiwick is financials. My outlook has been negative for over a year and, technically, I have been “right” on my calls. Seeing massive capital destruction has brought me no pleasure, but unfortunately I see little on the horizon that would change my outlook. In fact, after observing the US economy so derailed, I feel that I must act as a citizen of this great country to attempt to offer solutions to this economic train wreck we are all involved in...
Discussion: Portfolio, Moon of Alabama and naked capitalism

Neha Singh / Reuters:
Credit card industry may cut $2 trillion of lines: analyst -- The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said...

Discussion: Donklephant
Editorial / NY Times:
Bailing Away -- The federal government is going for broke in an attempt to avert the type of calamitous financial collapse that led to the Great Depression. No one would fault the objective, but throwing money at the problem is becoming an end in itself...

Even, as the rescue tab rises, taxpayers are not being adequately informed or protected. There is as yet no effort to deal effectively with the underlying causes of the problem, especially mass mortgage defaults that feed bank losses. And officials seem to think urgency to act absolves them from considering the longer-term implications of the actions they take...
Doug Short / dshort.com:
The Mega-Bear Quartet -- Some commentators have speculated that the current bear market could match the ferocity of the Dow following the Crash of 1929, the post-1989 Nikkei 225, or the NASDAQ after the Tech Bubble. As this comparison shows, it's far too soon to know. But the S&P 500 is off to a frightening start...

discussion: The Big Picture
UK ‘closer’ to adopting the euro — The UK is “closer than ever before” to joining the euro, according to the president of the European Commission, Jose Manuel Barroso. — Speaking on a French radio show, he said British politicians were considering the move because of the effects of the global credit crunch...
LIMP ECONOMY WOE$ SPELLING BEDROOM TROUBLE -- Gotham gals want their own rescue package.

With Wall Street woes worsening and job security shaky, men have bailed out of the bedroom and women are reporting a citywide sexual recession.

Men's libidos have gone the way of the Dow as struggles with economy-related stress, depression and anxiety are at an all-time high, experts say...
  • 62% of people are having less sex this year due to stress, according to a survey by the makers of Relora, an anxiety drug.
  • 13% increase in Viagra sales in third quarter of 2008, compared with the same period in 2007.
  • 86% increase in female sex toys sold last month in Babeland compared with the same period in 2007
BBC: Britons 'saving money with sex'
NY Times:
Never Let Them See You Sweat -- The economy jolts and stumbles, wars slog on in Afghanistan and Iraq, and the horrors of a new terrorist attack blanket the news and draw frayed attention yet again to our precarious alliances in the world. The watchword for the holidays is subdued; certainly not much inspires celebration...
discussion: Townhall.com and JustOneMinute
Maureen Fan / Washington Post:
Report: President Warns China's Economic Edge Is Weakening -- Chinese President Hu Jintao warned at a weekend meeting of the Communist Party's elite Politburo that China is losing its competitive edge as international demand for its products is reduced, according to official state media reports Sunday...
Discussion: Matthew Yglesias and Kevin Drum
Glenn Kelman / TechCrunch:
The First-Time CEO’s Recession Survival Guide -- Startups can be the most conservative organizations in the world. We spend so much energy nurturing our delicate egos against naysayers and self-doubt that we can hardly admit mistakes. This is especially true of first-time CEOs. Thousands of new web companies were born in the last few years, and many of us just got the job.

We set off with the same directions: tackle a big problem, listen to customers, work hard, pinch pennies, hire slow, fire fast. Still good advice. But I think we’ll have different advice for one another once we’ve come through this downturn, about how we had to change to survive. Since real estate crashed before the overall market, Redfin (my online real estate company) has had a year’s head-start sorting out which changes seem to be working for us...
Stowe Boyd / Message: Halley Suitt And Mary Hodder Smack Down Glenn Kelman
Prieur du Plessis / Minyanville:
Credit Crisis Watch -- For the world’s financial system to start functioning normally again, it's imperative that confidence in the credit markets be restored. In order to gauge the progress being made to unclog credit markets, I regularly monitor a range of financial sector spreads and other measures...

In summary, although some progress has been made as a result of central banks’ liquidity facilities and capital injections, the credit markets are not yet thawing.
Doris Dungey / TantaNY Times:
Doris Dungey, Prescient Finance Blogger, Dies at 47 -- The blogger Tanta, an influential voice on the mortgage collapse, died Sunday morning in Columbus, Ohio.

Tanta, who wrote for Calculated Risk, a finance and economics blog, was a pseudonym for Doris Dungey, 47, who until recently had lived in Upper Marlboro, Md. The cause of death was ovarian cancer, her sister, Cathy Stickelmaier, said.

Thanks in large part to Tanta’s contributions, Calculated Risk became a crucial source of prescient analysis as the housing market at first faltered, then collapsed and finally spawned a full-blown credit crisis...
comment: The Johnsville News has frequently linked to Tanta's articles over the past year. Rest in Peace good lady.

Calculated Risk:
Sad News: Tanta Passes Away

discussion: Emptywheel and Mercury Rising
Turkey Rescue

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