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Wednesday, June 3, 2009

Great Recession Roundup — June 3, 2009

Items of Interest:

Chairman Ben S. Bernanke / Board of Governors of the Federal Reserve:
Testimony — Current economic and financial conditions and the federal budget -- We continue to expect overall economic activity to bottom out, and then to turn up later this year. Our assessments that consumer spending and housing demand will stabilize and that the pace of inventory liquidation will slow are key building blocks of that forecast. Final demand should also be supported by fiscal and monetary stimulus, and U.S. exports may benefit if recent signs of stabilization in foreign economic activity prove accurate...

Globe & Mail:
Bernanke raises alarm on spending -- Federal Reserve chairman Ben Bernanke warned Wednesday that the U.S. spending spree now threatens the country's financial stability, amid growing questions over whether governments and central banks around the world have gone too far...

Mohamed El-Erian / Financial Times:
Why Bernanke Is Right to Be Worried -- Fed chairman Ben Bernanke’s congressional testimony on Wednesday warrants careful attention by market participants – this at a time when policy measures play an unusually large role in determining both absolute and relative values in many markets...

Felix Salmon: Bernanke's fiscal focus
Todd Harrison / Minyanville:
Pick a Side: Hyperinflation or Deflation? -- The banking system, stymied with credit dependency, is not operating normally. Hidden behind bailouts, stimulus packages, super-conduits, term auction financing, mortgage rate freezes, foreclosure freezes, working groups and Public-Private Investment Programs are politicians attempting to engineer a business cycle that long ago lost its way.

The qualifier of this discussion is the elasticity of debt, which is stretched by historical standards. Total outstanding credit obligations are 350% of GDP and the consumer (70% of GDP) is hamstrung by wealth destruction and depleted savings. As such, I would place back-of-the-envelope odds at 3-1 that deflationary forces continue to manifest...
Tom Fant / Minyanville:
Qualitative Easing: Markets on the Edge of a Knife -- I’m not sure the Fed understands the depths of the problem it's created by letting 10-year rates back up 100 basis points since March. I can’t help but feel the same way I did when George W. Bush landed on the aircraft carrier and proclaimed, "Mission accomplished." ...
David Goldman / Inner Workings:
Stasis in the zombie economy -- My silence during the past several days reflects lack of things to say rather than lack of time or interest...

Lack of things to do, absence of ideas, and low volatility are hallmarks of the zombie economy...

Over time I expect a long, slow decoupling of Asia from the US economy — nothing drastic, no Chinese dumping of Treasuries, no grandstanding. No-one is in a position, nor has a motivation, to do anything quickly.
GM, Chrysler say dealer cuts key part of revival -- Top executives of General Motors Corp and Chrysler LLC were pressed by angry U.S. senators on Wednesday to rethink plans to slash more than 2,300 dealerships as a key part of their restructuring.

Industry analysts have long said that the sprawling retail networks hurt Detroit automakers because they force dealers -- particularly those in the suburbs of large cities -- to compete more against each other than rival automakers.

The automakers have set aggressive deadlines to identify the showrooms they will retain after emerging from bankruptcy with the help of billions of dollars of taxpayer funds...
Treasury Secretary Timothy Geithner can't sell his Larchmont, NY houseTim Geithner's House Goes Into Shadow Housing Inventory

ABC News:
Geithner Faces Sluggish Market, Rents out NY Home -- The real estate market's troubles are hitting close to home for Treasury Secretary Timothy Geithner.

After reducing the price on his house in a tony New York City suburb to less than he paid for it, Geithner still couldn't sell and recently rented it out instead, according to real estate agents familiar with the deal.

Geithner put his five-bedroom Tudor near leafy Larchmont on the market for $1.635 million in February, after heading to Washington for his job as the nation's top economic official.

A few weeks after the asking price was dropped to $1.575 million, the home was rented for $7,500 a month on May 21, said the agents, Scott Stiefvater of Stiefvater Real Estate and Debbie Meiliken of Keller Williams Realty New York. . .
Housing Doom blog: Geithner Can’t Unload His House Either
Zilow: Geithner’s Larchmont House for Sale
Mary Grigat / Huffington Post:
I Pine, You Pine, We All Pine for Subprime -- Alas, those days -- our national bacchanalia devoted to the attainment of that which we cannot afford -- are done and dusted, left rotting and festering in the past like so much road kill.

But my question is this: why must I suffer for the sins of the fathers? . . .
Bernie, Mark, and Andrew Madoff on the trading room of Bernard L. Madoff Investment SecuritiesVanity Fair:
Did the Madoff Sons Know? -- Friends of Mark and Andy Madoff tell Vanity Fair writer David Margolick that Andrew has called what his father did to him and his brother “a father-son betrayal of biblical proportions,” and has said that to categorize it as being blindsided would amount to the understatement of the century. But others, including Madoff alumni, don’t believe the boys could have been unaware of the scheme.

Margolick talks with their friends, surrogates, and former colleagues, and reveals that when Bernie Madoff broke the news of his Ponzi scheme to his sons, in the kitchen of his penthouse apartment, Mark was angry and Andrew was on the floor, sobbing. . .
Dealbook / NY Times: How Much Did the Madoff Sons Know?

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