Welcome to the Depression

Items of Interest:

Paul Krugman / NY Times:
The Third Depression -- Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression...

discussion:
IBD:
Krugman's Depression -- Nobel Prize-winning economist Paul Krugman says the U.S. is in the "early stages of a third Great Depression." If he's right, it's only because American policymakers have been following his advice...

Huffington Post:
Paul Krugman: Why We Could Be Entering 'A Third Depression' -- Krugman isn't alone in his fear that the world economy is becoming increasingly precarious. The Wall Street Journal noted that members of the Federal Reserve are in private planning for the possibility of a double-dip recession in America -- a concern shared by MarketWatch's in-house economist...

NewsBusters
Kudlow, Forbes Debunk Krugman's 'Third Depression' Call --It's hard to imagine an economist being provocative, but Paul Krugman, a Nobel Prize winner, has managed to do so.

In his June 28 New York Times op-ed, Krugman argued that since governments around the world aren't willing to double-down on Keynesian policies meant to stimulate the global economy, the United States and the rest of the world are facing a third depression...

Calculated Risk:
Krugman: "The Third Depression"

related:
Kevin Depew / Minyanville:
Five Things You Need to Know: The Modern Stealth Depression Revisited -- Welcome to the Depression. No, don't drop whatever it is you're doing. Don't get up. It's not going anywhere. It will wait. It's just going to sit over here in the corner and read a magazine while you do whatever it is you need to do.

A Depression doesn't run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality...

Mike Mish Shedlock / Minyanville:
In the Midst of a Depression, Consumer Confidence Plunges -- Depression is the price we pay for budgetary murder and, contrary to Krugman's belief, further budgetary murder can't possibly cure anything...

----

Wall Street Journal:
The Keynesian Dead End -- Today's G-20 meeting has been advertised as a showdown between the U.S. and Europe over more spending "stimulus," and so it is. But the larger story is the end of the neo-Keynesian economic moment, and perhaps the start of a healthier policy turn...

discussion:
Bruce McQuain / Questions and Observations: Is Keynesianism finally dead?
Vox Popoli: The Atlanta Journal/Constitution of Econ
Dave Schuler / The Glittering Eye: The Technocrats We Will Always Have With Us
TBlumer / BizzyBlog: WSJ: ‘The Keynesian Dead-End’

----

Zero Hedge:
No, This Is Not An Onion Headline: S&P Puts Moody's On Downgrade Review -- S&P has just announced it has put Moody's on creditwatch with negative implications, the reason: "We believe there may be added risk to U.S.-based credit rating agency Moody's business profile following recent U.S. legislation that may lower margins and increase litigation related costs for credit rating agencies"...

----

Ambrose Evans-Pritchard / Telegraph.co.uk:
Time to shut down the US Federal Reserve? -- As for the Fed, I venture to say that a common jury of 12 American men and women placed on the Federal Open Market Committee would have done a better job of setting monetary policy over the last 20 years than Doctors Bernanke and Greenspan...

Environmental Doom & Gloom

Nice Logo. Scary stories ripped from the headlines at ApocaDocs, via Paul Kedrosky.

[Resource Depletion]: from Texas Tribune, Sat Jun 26 2010:
How Bad Is the Ogallala Aquifer's Decline in Texas? --  Stretching across eight states, the amount of water is so vast that, according to one writer, it could fill Lake Erie nine times over. Within Texas, the Ogallala accounts for about 40 percent of all water use. But the aquifer's levels are declining sharply here. In a dry growing season last year, the High Plains Water District, which includes all or part of 15 Panhandle counties, recorded an average drop of 1.5 feet, the most since 1997. The rains have returned, but the 2007 state water plan projects that the Ogallala's volume will fall a staggering 52 percent between 2010 and 2060, as corn and cotton growers continue to draw from its depths.... In general, he says, Texans are probably pumping the Ogallala at about six times the rate of recharge.... Edwards Aquifer Authority v. Day has the potential to gut the state's ability to regulate groundwater through local districts, by making them more vulnerable to court challenge. If it goes the other way -- and the court decides landowners do not have an ownership right in groundwater -- then Johnson says that districts would have few limits on their ability to restrict groundwater use.


[Biology Breach]: from BBC, Fri Jun 25 2010:
Africa 'witnessing birth of a new ocean' -- Africa is witnessing the birth of a new ocean, according to scientists at the Royal Society. Geologists working in the remote Afar region of Ethiopia say the ocean will ...

[Species Collapse]: from New York Times, Thu Jun 24 2010:
Asian Carp gets to threshold of Great Lakes -- After months of worrying over hints and signs and DNA traces suggesting that Asian carp, a voracious, nonnative fish, might be moving perilously close to the Great Lakes, ...

[Species Collapse]: from PhysOrg, Wed Jun 23 2010:
Humans will be extinct in 100 years says eminent scientist -- Eminent Australian scientist Professor Frank Fenner, who helped to wipe out smallpox, predicts humans will probably be extinct within 100 years, because of overpopulation, ...

Deadly Danger Of Dow 50,000

Will a broke U.S. government go nuts? So we end up with monetary and tax inflation, plus simultaneous asset deflation.

Todd Harrison / Minyanville:
The Eye of the Financial Storm -- We often discuss our current crossroads; government drugs that mask the symptoms after years of societal largesse versus medicine that cures the disease in the form of asset class deflation...

I believe we’re in the eye of the storm, a relative calm between the first phase of the financial crisis and the cumulative comeuppance that'll flush -- and perhaps reset -- the system...

James Kostohryz / Minyanville:
Ten Observations On Risk of Rising Inflation -- A doomsday scenario is neither necessary, nor even likely. Furthermore, I can envision many scenarios in which the US economy does quite well in an environment of moderately accelerating inflation and rising nominal bond yields.

However, in the event that my predictions regarding cyclical and secular forces leading to higher inflation prove prescient, the situation will become quite fluid.

You could even call it scary...

----


Daniel Amerman / SafeHaven:
Deadly Danger Of Dow 50,000 (1 Minute Article)

related:
The Johnsville News:
$14 Trillion U.S. Debt really is ---> $130 Trillion

"Vladimir Obama"

An interesting "independent" British view of Barrack Obama's policy slant from the Economist.

The Economist:
Obama v BP -- America’s justifiable fury with BP is degenerating into a broader attack on business

FOR over a month, Barack Obama watched the oil spill spread over the Gulf of Mexico with the same powerless horror as other Americans. Finally, lampooned by his countrymen for his impotence, he was spurred into action. He attacked the only available target—BP—and, to underline the seriousness with which he takes this problem, he gave his first Oval Office address on the subject.

The address got poor reviews; the attack on BP better ones. This week the firm bowed to pressure, and announced that it was, in effect, handing over $20 billion to the government to pay for compensation and clean-up, as well as cancelling the payment of any dividends this year and setting up a fund—of a mere $100m—to compensate unemployed oil workers.

This may do Mr Obama some good. Whether it will benefit America is more doubtful...

Vladimir Obama

Mr Obama is not the socialist the right claims he is (see article). He went out of his way, meeting BP executives on June 16th, to insist that he has no interest in undermining the company’s financial stability. But his reaction is cementing business leaders’ impression that he is indifferent to their concerns. If he sees any impropriety in politicians ordering executives about, upstaging the courts and threatening confiscation, he has not said so. The collapse in BP’s share price suggests that he has convinced the markets that he is an American version of Vladimir Putin, willing to harry firms into doing his bidding.

Nobody should underestimate the scale of BP’s mistake, nor the damage that it has caused. But if the president does not stand up for due process, he will frighten investors across the board. The damage to America’s environment is bad enough. The president risks damaging its economy too...

----

discussion:
politicalwrinkles.com:
Vladimir Obama -- Perhaps instead of Vladimir Obama some might prefer Barrack Chavez? Dangerous, dangerous path we're headed down...

Tertium Quids:
"Vladimir Obama" -- And yet there are those Republicans who believe calling the President out for such Putin-esque behavior is unacceptable...

Michael Barone / Washington Examiner:
Obama's thuggery is useless in fighting spill -- Thuggery is unattractive. Ineffective thuggery even more so. Which may be one reason so many Americans have been reacting negatively to the response of Barack Obama and his administration to BP's Gulf oil spill...

Update:
AWL.com:
Rich People Things: 'Economist' Outraged by 'Vladimir Obama's' Anti-BP 'Corporate Bloodlust' -- There’s no pique quite like the British kind. The eyebrows arch, the throat clears, the spittle flecks, and the rhetoric swells portentously. It’s not for nothing that the coronation robe of the country’s wheezing monarchy is purple...

----

related:
Washington Wire / WSJ:
Barton: BP ‘Shakedown’ Apology Retracted -- Lest there be any doubt that Rep. Joe Barton (R, Texas) would like to unapologize to BP, the congressman has put out a written statement amending his comments of this morning.

“I apologize for using the term ‘shakedown’ with regard to yesterday’s actions at the White House in my opening statement this morning, and I retract my apology to BP,’’ Mr. Barton’s statement said. “As I told my colleagues yesterday and said again this morning, BP should bear the full financial responsibility for the accident on their lease in the Gulf of Mexico.”

Mr. Barton added: “I regret the impact that my statement this morning implied that BP should not pay for the consequences of their decisions and actions in this incident.”

During a public hearing this afternoon, Mr. Barton offered a similar walk-back of his initial comments, in which he had used the word “shakedown’’ to describe the White House deal for BP to fund a $20 billion restitution account for damage from the Gulf oil spill...

Ann Woolner / Bloomberg:
Obama’s $20 Billion BP ‘Shakedown’ Is a Shakeup -- So what’s to be thought of the $20 billion fund BP Plc was persuaded to set up?

Call it a pretty good start. A shakedown? Oh, please...

But how can it be a shakedown, when BP had already pledged to pay all legitimate claims? If that was a sincere offer, then the fund is simply an apparatus to insure that it keeps its promise and does so fairly and more quickly.

CNN:
Democrats continue hammering GOP over Barton apology to BP

----

$14 Trillion U.S. Debt really is ---> $130 Trillion

Items of Interest:

Kevin Williamson / National Review Online:
The Other National Debt -- About that $14 trillion national debt: Get ready to tack some zeroes onto it. Taken alone, the amount of debt issued by the federal government — that $14 trillion figure that shows up on the national ledger — is a terrifying, awesome, hellacious number: Fourteen trillion seconds ago, Greenland was covered by lush and verdant forests, and the Neanderthals had not yet been outwitted and driven into extinction by Homo sapiens sapiens, because we did not yet exist. Big number, 14 trillion, and yet it doesn’t even begin to cover the real indebtedness of American governments at the federal, state, and local levels, because governments don’t count up their liabilities the same way businesses do...

The debt numbers start to get really hairy when you add in liabilities under Social Security and Medicare — in other words, when you account for the present value of those future payments in the same way that businesses have to account for the obligations they incur...

Now, these aren’t perfect numbers, but that’s the rough picture: Call it $130 trillion or so, or just under ten times the official national debt. Putting Nancy Pelosi in a smaller jet isn’t going to make that go away.

discussion:
Financial Armageddon: 'Call It $130 Trillion or So'

---

Wall Street Journal:
America's Municipal Debt Racket -- State and local borrowing as a percentage of U.S. GDP has risen to an all-time high of 22% in 2010.

New Jersey officials recently celebrated the selection of the new stadium in the Meadowlands sports complex as the site of the 2014 Super Bowl. Absent from the festivities was any sense of the burden the complex has become for taxpayers.

Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn't resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes.

Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades...

related:
WSJ Deal Blog:
Warren Buffett Worries About Muni Defaults. -- Warren Buffett is warning of a “terrible problem” in municipal debt and has trimmed his investments. The cost of insuring municipal debt – through credit default spreads — has increased as some communities, such as Central Falls, R.I., have inched closer to insolvency...

USDebtClock.org

----

Investors Business Daily / Real Clear Markets:
Fannie & Freddie: The Mother of All Bailouts -- The taxpayer cost of bailing out Fannie Mae and Freddie Mac could be as high as $1 trillion. Yet Democrats still refuse to reform the toxic twins, making reform meaningless...

----

Tom Stone:
Homeless -- keeping faith ... homeless woman, san francisco

T + Times = Sell?

Do the NY Times & the 'Mr. T' Gold Indicator signal that the price of gold is at a top?

Items of interest:

Kevin Depew / Minyanville:
Has the Mr. T Gold Indicator Given a Sell Signal? -- The Mr. T Gold Indicator is a proprietary technical indicator created by Minyanville to identify and anticipate prospective exhaustion points in the price data for gold. Some technical indicators rely on formulas applied to the price data of a security, but these types of indicators can be very subjective, requiring an analyst to view the signals that are generated within the context of still more indicators! The Mr. T Gold Indicator, on the other hand, is completely objective and easy to use. All you have to do is look at Mr. T. What could be easier than that? ...

related:
DiscDish:
The A-Team... -- The A-Team coming to the big screen on June 11, the original The A-Team [TV series] is coming to DVD in a Complete Series set on June 8...

----

The Big Picture:
Uh-Oh: Gold on the Front Page of Sunday’s NYTimes… -- Contrarians beware: A long article on the rise of Gold as an investment asset class is on the front page of the NYT...

The thinking behind such contrarian indicators (such as the magazine cover) is as follows: By the time any given investment trend reaches the critical mass required for a staid front page editor to become aware of it, it is very late in that cycle. Indeed, in order to be more than a merely quirky story, it has to have a broad enough appeal to be approved for the cover story...

related:
Nelson Schwartz / NY Times:
Uncertainty Restores Glitter to an Old Refuge, Gold -- Inflation, deflation, government borrowing or the plunging euro — you name it — the specter of these concerns has set off a dash to gold, driving the precious metal to new highs and illustrating how fears of economic turmoil have moved from the fringe to the mainstream.

And gold bugs, often dismissed as crackpots who hoard gold bars in the basement, are finally having their day…

The most visible new gold enthusiasts range from the Fox News commentator Glenn Beck on the right to the financier George Soros on the left, with even some sober-minded Wall Street types developing a case of gold fever. While their language may differ, they share a fundamental view that the age-old refuge of gold is relevant again, especially as other assets like stocks and national currencies show signs of weakness...

Tongue only half in cheek, Glenn Beck advised his audience to consider “Gold, God and Guns,” while laying out three possible scenarios for the economy: recession, depression or collapse...

More of Les

Tom Cruise and Jennifer Lopez's Bump and Grind at Sunday's MTV Movie Awards Show. Cruse reprised his role as Tropic Thunder's dancing, foul-mouthed film producer Les Grossman.

note: Les comes in at the 1:26 min. mark.
source: People.com

related:
Tropic Thunder: Les Grossman dancing through credits
Tropic Thunder: Les Grossman deals with terrorists
Tropic Thunder's Les Grossman/Tom Cruise Robert Pattinson Spoof

U.S. Deepwater Offshore Oil Biz Goes Bye-Bye

The Obama Administration is using the gulf oil spill as a excuse to administer the Coup de grâce to the U.S. offshore deepwater oil drilling business. The end result will be lost jobs and income for American workers and lost oil royalties/taxes for the US gov't and gulf states. It's not a smart move. But, this policy fits in with the overall clueless response to the gulf oil spill by the Obama administration.

Items of interest:

Minyanville:
Why the US Still Needs Oil Drillers -- I've lived in Louisiana all of my life and worked as a lawyer for over 30 years. I have no particular love for the oil companies themselves, but their presence and employment is the economic backbone of my state as well as most of the Gulf Coast. Many, many families obtain their livelihood, directly or indirectly, from the oil industry...

Everyone wants to hate BP right now. That's understandable. But what people need to understand is that drilling for oil isn't the same as selling bottled water. Those companies are on the bleeding edge of technology and what they do. They have the best and the brightest working on it and believe me, no expense is too great, no corner is cut. There's simply too much at risk to do that. The best of everything is used in a drilling operation. But if you're on the bleeding edge of something, mistakes and mishaps occur...

related:
The Huffington Post:
Bobby Jindal Asks Obama To End Moratorium On Deepwater Drilling -- A White House official emails over a rather blunt response. The gist is simple: while Jindal and others may think dire economic consequences will result from the moratorium, it would be far more perilous and catastrophic if another spill took place...

Bayou Buzz News:
Lifting Obama BP Oil Spill Moratorium Courts Legal, Political Questions -- Louisiana is strongly in favor of putting the Gulf of Mexico back in drilling operations is probably an understatement.

Many of us who are advocating the lifting of the moratorium cite that if we do not remove that restriction, there will be much more “oil” and “brain drain” of businesses and jobs from within the Gulf of Mexico areas and in adjacent regions such as south Louisiana...

Wall Street Journal:
Deepwater Drillers: Analysts Cut Bait -- Goldman Sachs analysts led by Daniel Boyd say they’re now expecting the current six-month moratorium to stretch into 12 months. Things could be slow enough that drilling activity won’t be substantial again until 2012...

Over at FBR Capital, Robert MacKenzie isn’t expecting the moratorium to be formally extended, but he cut estimates to reflect the chances that drillers face delays as they get back to work in 2011. His own view is that there’s a countervailing force: federal oil & gas revenues. “Should operators begin to fear a longer hiatus, we believe that the vast majority of deepwater rigs would depart the U.S. [Gulf of Mexico], likely for at least several years on average,” he writes. “This would deal a severe blow to royalties on existing production as it declines, as well as dramatically reduce or eliminate federal lease sale revenue.”...

Before It's News:
Enviros Didn't Cause The Gulf Oil Spill ... Peak Oil Did

----

Houston Chronicle:
Industry: Thousands of oil jobs at risk -- A recent analysis by the Louisiana Mid-Continent Oil and Gas Association, a trade group, said a moratorium would defer 80,000 barrels of daily production in 2011, or about 4 percent of projected deepwater production for the year...

The LMOGA analysis said each of the 33 deepwater drilling rigs idled by the president's order employs 180 to 280 workers with an average weekly wage of $1,804. State labor officials said the average weekly manufacturing wage in Louisiana was just under $1,000.

If the Gulf is off limits, rigs could be moved, perhaps to the rapidly expanding Brazil market. Long-term contracts would make them unavailable for years after the moratorium is lifted, Adams said...

Fox 8 / New Orleans:
Fear results from Gulf deepwater drilling moratorium -- "What I ask.. have immediate and have rigorous safety inspections within the next month. We're only talking about 33 (rigs). Do that, and if there's any issue that can't be fixed immediately then you stop that rig. You don't shut down every rig in sight," said Sen. David Vitter (R-Louisiana)...

----

USA Today:
Future losses from BP oil spill worry Gulf Coast businesses -- The energy industry is bracing for the fallout from President Obama's six-month moratorium on deep-water oil drilling in the Gulf. Nearly 90% of the nation's offshore oil rigs are off the Louisiana coast, the state says. Louisiana Gov. Bobby Jindal says the moratorium could cost the state 20,000 jobs over the next 18 months...

Reuters:
Moratorium to cut 25 mln bbls of 2011 US crude -- The six-month U.S. moratorium on deep water oil drilling should cut 2011 crude output by about 25 million barrels, the top U.S. energy forecaster said on Tuesday...

Nola.com:
Regulatory delays could take heavy toll on shallow-water drilling

Hot Air:
Rangel on Obama WH response in Gulf: Clueless

----

Matthew Lynn / Bloomberg:
BP Needs to Tell Whining Americans to Take a Hike -- So far, BP has been playing this right out of the chapter in the spin doctor’s manual headed, “What to do when your company is about as popular as the Third Reich in 1946.” ...

The trouble is, none of it is going to work. Iranian President Mahmoud Ahmadinejad has more chance of getting the Ford Motor Co. franchise for Lubbock, Texas, than BP does of staying in business in the U.S. So why not try a complete reversal of tactics instead? Tell everyone in the U.S. to go stuff it where the oil don’t leak...

----

Unburdened Bernie

Nice picture! Nice place for lots of banksters too.

Steve Fishman / New York Magazine:
Bernie Madoff, Free at Last -- In prison he doesn’t have to hide his lack of conscience. In fact, he’s a hero for it...

an inmate badgered Madoff about the victims of his $65 billion scheme, and kept at it. According to K. C. White, a bank robber and prison artist who escorted a sick friend that evening, Madoff stopped smiling and got angry. “F**k my victims,” he said, loud enough for other inmates to hear. “I carried them for twenty years, and now I’m doing 150 years.”  ...

One day, Shannon Hay, a drug dealer who lived in the same unit in Butner as Madoff, asked about his crimes. “He told me his side. He took money off of people who were rich and greedy and wanted more,” says Hay, who was released in December. People, in other words, who deserved it...

Deadbeat Nation or PO'd Nation?

Items of Interest:

There are strong feelings on both sides of the issue of "walking away" from your home mortgage. If companies like Morgan Stanley and Blackrock can walk away from their commercial mortgages in "strategic defaults", why shouldn't people?

NY Times:
Owners Stop Paying Mortgages, and Stop Fretting -- For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”...

Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”...

discussion:
Tim Knight / Slope of Hope:
Deadbeat Nation -- Not to put too fine a point on it, these people make me sick. My wife and I bought our house with a down payment earned with hard work. We filled out all the paperwork honestly and with complete documentation. We haven't missed a single payment, or even been a day late, not even once. Never in a million years would I consider flipping off the bank and just hanging out in this house for free until I was thrown out onto the street...

Luigi Zingales  / City Journal:
The Menace of Strategic Default -- Homeowners who walk away from their mortgages undermine our financial system...

Felix Salmon / Reuters:
Continuing risks in the housing market -- As for borrowing the money, I think the folks who did so did absolutely the right thing. When someone offers you a government-subsidized non-recourse loan on an appreciating asset, they’re giving you a put option. The more you borrow and the less you put down, the more that option is worth. These borrowers maximized their leverage. The market turned, and they exercised their put options. They are not the dumb ones, they are the smart ones. The dumb ones are the ones who gave away the farm lending this money...

Lita Epstein / Housing Watch:
Walk Away From Your Mortgage: A Good New Beginning? -- Frustrated by job losses, underwater homes, and unwieldy mortgage modification programs, more and more homeowners are crafting their own mortgage modification programs. These programs, which do not have the approval of lenders, involve paying nothing more and using the time till they get evicted by the bank to create a Plan B...

Diana Olick / CNBC Realty Check blog:
BofA: Mortgage Walkaways Have Huge Incentive -- Why are they (Bank of America) getting more aggressive on modifications?

Because more borrowers are walking away. Yes, I know we've talked about this forever on this blog and on CNBC, and the New York Times did a piece yesterday on it, and 60 Minutes did a piece on it a few weeks ago. The fact of the matter is it's getting worse, and B of A execs are acknowledging that openly...

31 percent of foreclosures in March were deemed to be "strategic default" by researchers at University of Chicago and Northwestern University.

That's up from 22 percent in March of 2009...

----

related:
Robert Lowenstein / NY Times:
Walk Away From Your Mortgage! - No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth....

John Robb:
The double standard on debt defaults. The aggressive behavior of corporations and high net worth individuals relative to debt and contracts will be copied by the rest of society. Get over it, game theory dictates this. The result a legalism so intense (since basic norms of behavior can't be assumed, they must be spelled out with excruciating detail and enforced through lengthy and exhaustive monitoring) that the overhead expenses of running our economic system become unsustainable. Why? This behavioral roll-out converts the economic returns on societal complexity already in place (systems we built to solve past problems) from marginally positive returns (I'm being generous) into deeply negative drags on all economic and social activity.

Diana Olick / CNBC Realty Check blog:
Walkaways, Pay Option ARMS Hit Banks Bad